As filed with the Securities and Exchange Commission on April 24, 2003
1933 Act Registration No. 2-57526
1940 Act Registration No. 811-2699
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
----- ---
Post-Effective Amendment No. 53 X
---
|
and/or
Amendment No. 49
(Check appropriate box or boxes.)
Copy to:
P. Michelle Grace, Esq. Martha J. Hays, Esq.
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
(Name and Address of Agent for Service)
|
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment.
It is proposed that this filing will become effective (check appropriate box):
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a --- previously filed post-effective amendment.
AIM BASIC VALUE FUND
May 1, 2003
Prospectus
AIM Basic Value Fund seeks to provide long-term growth
of capital.
This prospectus contains important information about the Class A, B, C and R 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.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-3 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-9 Taxes A-10 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, 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 Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. 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.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet this objective by investing, normally, at least 65% of its total assets in equity securities of U.S. issuers that have market capitalizations of greater than $500 million and that the portfolio managers believe to be undervalued in relation to long-term earning power or other factors.
The fund may also invest up to 35% of its total assets in equity securities of U.S. issuers that have market capitalizations of less than $500 million and in investment-grade non-convertible debt securities, U.S. government securities and high-quality money market instruments, all of which are issued by U.S. issuers. The fund may also invest up to 25% of its total assets in foreign securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting investments, the portfolio managers seek to identify those companies whose prospects and growth potential are undervalued by investors and that provide the potential for attractive returns. The portfolio managers allocate investments among fixed-income securities based on their views as to the best values then available in the marketplace. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1996................................................................... 15.12%
1997................................................................... 27.23%
1998................................................................... 7.02%
1999................................................................... 32.04%
2000................................................................... 20.25%
2001................................................................... 0.13%
2002................................................................... -23.14%
|
The Class A shares' year-to-date total return as of March 31, 2003 was -6.31%.
During the periods shown in the bar chart, the highest quarterly return was 21.10% (quarter ended June 30, 1999) and the lowest quarterly return was -20.82% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS INCEPTION DATE
------------------------------------------------------------------------------
Class A 10/18/95
Return Before Taxes (27.37)% 4.33% 10.25%
Return After Taxes on
Distributions (27.37) 4.11 9.62
Return After Taxes on
Distributions and Sale of
Fund Shares (16.81) 3.42 8.27
Class B 10/18/95
Return Before Taxes (27.45) 4.49 10.41
Class C 05/03/99
Return Before Taxes (24.39) -- 0.13
Class R(1) 10/18/95(1)
Return Before Taxes (23.25) 5.35 10.96
------------------------------------------------------------------------------
S&P 500(2) (22.09) (0.58) 7.64(6) 10/31/95(6)
Russell 1000--Registered
Trademark-- Index(3) (21.65) (0.58) 7.47(6) 10/31/95(6)
Russell 1000--Registered
Trademark-- Value Index(4) (15.52) 1.16 9.18(6) 10/31/95(6)
Lipper Large-Cap Value Fund
Index(5) (19.68) (0.39) 6.94(6) 10/31/95(6)
------------------------------------------------------------------------------
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only and after-tax returns for Class B, C and R shares will vary.
(1) The returns shown for these periods are the blended returns of the historical performance of the fund's Class R shares since their inception and the restated historical performance of the fund's Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Class R shares is June 3, 2002.
(2) 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. The fund has elected to use the Standard & Poor's 500 Index as its broad-based index rather than the Russell 1000--Registered Trademark-- Index because the Standard & Poor's 500 Index is a more widely recognized gauge of U.S. stock market performance. The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Large-Cap Value Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(3) The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
(4) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with the lower price-to-book ratios and lower forecasted growth values.
(5) The Lipper Large-Cap Value Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large-Cap Value category. These funds typically invest in stocks with market capitalizations greater than $5 billion at the time of purchase and have a below average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's 500 Index.
(6) The average annual total return given is since the date closest to the inception date of the classes with the longest performance history.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) CLASS A CLASS B CLASS C CLASS R -------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) -------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) -------------------------------------------------------------------------------- (expenses that are deducted from fund assets) CLASS A CLASS B CLASS C CLASS R -------------------------------------------------------------------------------- Management Fees 0.67% 0.67% 0.67% 0.67% Distribution and/or Service (12b-1) Fees 0.35 1.00 1.00 0.50 Other Expenses(5) 0.31 0.31 0.31 0.31 Total Annual Fund Operating Expenses 1.33 1.98 1.98 1.48 -------------------------------------------------------------------------------- |
(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 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the distributor paid a concession to the dealer of record and a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown in the table.
(5) Other Expenses for Class R shares are based on estimated average net assets for the current fiscal year.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $678 $948 $1,239 $2,063
Class B 701 921 1,268 2,139
Class C 301 621 1,068 2,306
Class R 151 468 808 1,768
--------------------------------------------------------------------------------
|
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $678 $948 $1,239 $2,063
Class B 201 621 1,068 2,139
Class C 201 621 1,068 2,306
Class R 151 468 808 1,768
--------------------------------------------------------------------------------
|
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2002, the advisor received compensation of 0.67% 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 management of the fund's portfolio are
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1998. From 1994 to 1998, he was Vice President and portfolio manager for Van Kampen American Capital Asset Management, Inc.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was a full-time student. From 1993 to 1997, he worked as a CPA for Deloitte & Touche.
- Matthew W. Seinsheimer, Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998. From 1995 to 1998, he was portfolio manager for American Indemnity Company.
- Michael J. Simon, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001. From 1996 to 2001, he was equity analyst and portfolio manager with Luther King Capital Management.
They are assisted by the Basic Value Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Basic Value Fund are subject to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge 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.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.44 $ 28.41 $ 23.84 $ 18.13 $17.25
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.02)(a) 0.06 0.05(a) 0.04
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.54) 0.06 4.74 5.75 1.16
================================================================================================================================
Total from investment operations (6.58) 0.04 4.80 5.80 1.20
================================================================================================================================
Less distributions:
Dividends from net investment income 0.00 0.00 (0.03) 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
================================================================================================================================
Total distributions 0.00 (0.01) (0.23) (0.09) (0.32)
================================================================================================================================
Net asset value, end of period $ 21.86 $ 28.44 $ 28.41 $ 23.84 $18.13
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (23.14)% 0.16% 20.20% 32.04% 7.02%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534,964 $2,066,536 $448,668 $70,791 $9,074
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.33%(c) 1.30% 1.32% 1.69% 1.74%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.33%(c) 1.30% 1.32% 1.71% 2.11%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.17)%(c) (0.05)% 0.49% 0.23% 0.25%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges.
(c) Ratios are based on average daily net assets of $2,508,345,697.
CLASS B
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $ 17.79 $ 17.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.09)(a) (0.08)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 5.62 1.15
=================================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 5.53 1.07
=================================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
=================================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $ 23.23 $ 17.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 31.13% 6.34%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,498,499 $1,538,292 $241,157 $55,785 $17,406
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34% 2.39%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36% 2.76%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $1,660,883,829.
CLASS C
----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $21.07
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.06)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 2.31
==========================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 2.25
==========================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09)
==========================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $23.23
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 10.72%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $518,575 $566,627 $193,863 $7,669
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34%(d)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 30% 20% 56% 63%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America, does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $588,489,280.
(d) Annualized.
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------
Net asset value, beginning of period $ 27.54
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.65)
===========================================================================
Total from investment operations (5.70)
===========================================================================
Net asset value, end of period $ 21.84
___________________________________________________________________________
===========================================================================
Total return(b) (20.70)%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,421
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets 1.54%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (0.37)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 30%
___________________________________________________________________________
===========================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $569,759.
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 consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R
------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no
initial sales deferred sales deferred sales deferred sales contingent
charge for certain charge charge on charge on deferred sales
purchases(2,3) redemptions within redemptions within charge(2)
six years one year(5)
- Generally, lower - 12b-1 fee of 0.35% - 12b-1 fee of 1.00% - 12b-1 fee of 1.00% - 12b-1 fee of 0.50%
distribution and
service (12b-1)
fee than Class B,
Class C or Class R
shares (See "Fee
Table and Expense
Example")
- Does not convert - Converts to Class - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only
appropriate for appropriate for limited to amounts appropriate for available to the
long-term short-term less than $250,000 short-term following types of
investors investors investors retirement plans:
(i) all section
401 and 457 plans,
(ii) section 403
plans sponsored by
section 501(c)(3)
organizations, and
(iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) 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 at the end of the month which is seven years after the date on 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 the end of the month which is eight years after the date on which you purchased your original shares.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) 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
Sales charges on the 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.
MCF--05/03
CATEGORY I INITIAL SALES CHARGES
---------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
---------------------------------------------------------------
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
---------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
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:
YEAR SINCE PURCHASE MADE CLASS B CLASS C ---------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None ---------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
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
MCF--05/03
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.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) 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 other 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 privileges; 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 Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
-------------------------------------------------------------------------------------------------------------------------
|
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
MCF--05/03
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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 Telephone Open your account using one of the Select the AIM Bank Connection(SM)
methods described above. option on your completed account
application or complete an AIM Bank
Connection form. Mail the application
or form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
SYSTEMATIC PURCHASE 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 $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase 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 a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
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; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
MCF--05/03
(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 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 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. 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 CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase $1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
MCF--05/03
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
|
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
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.
Through a Financial Consultant Contact your financial 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 or our AIM 24-hour
Automated Investor Line. 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 $250,000;
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. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.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 $250,000; and (4) you have already
provided proper bank information. 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.
|
MCF--05/03
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 REDEMPTIONS
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
Redemption 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.
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 $250,000;
(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 PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
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.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B and Class C shares only) 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.
MCF--05/03
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 under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund; or
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund).
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 into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge 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 initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares; or
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash
MCF--05/03
Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II 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 terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
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 you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
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
MCF--05/03
quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. 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 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 may 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 order. 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. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--05/03
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
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
|
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 publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com BVA-PRO-1
AIM MID CAP CORE EQUITY FUND
May 1, 2003
Prospectus
AIM Mid Cap Core Equity Fund seeks to provide long-term
growth of capital.
This prospectus contains important information about the Class A, B, C and R 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.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 FINANCIAL HIGHLIGHTS 6 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-3 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-9 Taxes A-10 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, 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 Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. 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.
The fund's investment objective is long-term growth of capital. 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 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Midcap--Registered Trademark--Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. The companies in the Russell Midcap--Registered Trademark-- Index are considered representative of medium-sized companies.
In complying with the 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund may invest up to 20% of its assets in equity securities of companies in other market capitalization ranges. The fund may also invest up to 20% of its assets in investment-grade debt securities, U.S. government securities and high-quality money market instruments. The fund may invest up to 25% of its total assets in foreign securities. For risk management or cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting investments, the portfolio managers seek to identify those
companies that are, in their view, undervalued relative to current or projected
earnings, or the current market value of assets owned by the company. The
primary emphasis of the portfolio managers' search for undervalued equity
securities is in four categories: (1) out-of-favor cyclical growth companies;
(2) established growth companies that are undervalued compared to historical
relative valuation parameters; (3) companies where there is early but tangible
evidence of improving prospects which are not yet reflected in the value of the
companies' equity securities; and (4) companies whose equity securities are
selling at prices that do not yet reflect the current market value of their
assets. The portfolio managers consider whether to sell a particular security
when any of these factors materially change.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
A larger position in cash or cash equivalents could detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity, and the potential lack of strict financial and accounting controls and standards.
To the extent the fund holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993...................................................................................................... 8.34%
1994...................................................................................................... 15.69%
1995...................................................................................................... 23.23%
1996...................................................................................................... 15.65%
1997...................................................................................................... 14.05%
1998...................................................................................................... -4.71%
1999...................................................................................................... 37.13%
2000...................................................................................................... 18.81%
2001...................................................................................................... 0.52%
2002...................................................................................................... -11.09%
|
The Class A shares' year-to-date total return as of March 31, 2003 was -4.53%.
During the periods shown in the bar chart, the highest quarterly return was 28.40% (quarter ended December 31, 1999) and the lowest quarterly return was -25.00% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
-------------------------------------------------------------------------------------------------------------------
Class A 06/09/87
Return Before Taxes (15.99)% 5.57% 10.32% --
Return After Taxes on Distributions (16.00) 3.46 7.34 --
Return After Taxes on Distributions
and Sale of Fund Shares (9.80) 3.65 7.11 --
Class B 04/01/93
Return Before Taxes (16.10) 5.75 -- 11.49
Class C 05/03/99
Return Before Taxes (12.58) -- -- 8.60
Class R(2) 06/09/87(2)
Return Before Taxes (11.14) 6.63 10.79 --
-------------------------------------------------------------------------------------------------------------------
S&P 500(3) (22.09) (0.58) 9.34 -- --
Russell Midcap--Registered Trademark--
Index(4) (16.19) 2.19 9.92 -- --
Lipper Mid-Cap Core Fund Index(5) (17.37) 2.90 9.28 -- --
-------------------------------------------------------------------------------------------------------------------
|
After tax-returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only and after-tax returns for Class B, C and R shares will vary.
(1)Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2)The returns shown for these periods are the blended returns of the historical performance of the fund's Class R shares since their inception and the restated historical performance of the fund's Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Class R shares is June 3, 2002.
(3)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. The fund has elected to use the Standard & Poor's 500 Index as its broad-based index rather than the Russell Midcap--Registered Trademark-- Index because the Standard & Poor's 500 Index is a more widely recognized gauge of U.S. stock market performance. The fund has also included the Russell Midcap--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Mid-Cap Core Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(4)The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies in the Russell 1000--Registered Trademark-- Index with the lowest market capitalization. These companies are considered representative of medium-sized companies.
(5)The Lipper Mid-Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Mid-Cap Core category. These funds typically invest in stocks with market capitalizations between $1 and $5 billion at the time of purchase and have an average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's MidCap 400 Index.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES ----------------------------------------------------------------------------------- (fees paid directly from your investment) CLASS A CLASS B CLASS C CLASS R ----------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) ----------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) -------------------------------------------------------------------------------- (expenses that are deducted from fund assets) CLASS A CLASS B CLASS C CLASS R -------------------------------------------------------------------------------- Management Fees 0.70% 0.70% 0.70% 0.70% Distribution and/or Service (12b-1) Fees 0.35 1.00 1.00 0.50 Other Expenses 0.38 0.38 0.38 0.38 Total Annual Fund Operating Expenses 1.43 2.08 2.08 1.58 -------------------------------------------------------------------------------- |
(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 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2)Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the distributor paid a concession to the dealer of record and a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown in the table.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $688 $978 $1,289 $2,169
Class B 711 952 1,319 2,244
Class C 311 652 1,119 2,410
Class R 161 499 860 1,878
--------------------------------------------------------------------------------
|
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $688 $978 $1,289 $2,169
Class B 211 652 1,119 2,244
Class C 211 652 1,119 2,410
Class R 161 499 860 1,878
--------------------------------------------------------------------------------
|
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2002, the advisor received compensation of 0.70% 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 management of the fund's portfolio are
- Ronald S. Sloan (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1998. From 1993 to 1998, he was President of Verissimo Research & Management, Inc.
- David W. Pointer, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was a full-time student.
They are assisted by the Mid/Large Cap Core Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Mid Cap Core Equity Fund are subject to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge 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.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report which is available upon request.
CLASS A
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 23.85 $ 24.04 $ 23.48 $ 18.97 $ 21.01
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.05)(a) 0.10(a) (0.01)(a) (0.24)(a)
---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) (2.56) 0.18 4.10 6.88 (0.81)
===============================================================================================================
Total from investment
operations (2.65) 0.13 4.20 6.87 (1.05)
===============================================================================================================
Less distributions:
Dividends from net investment
income -- (0.02) -- -- --
---------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains (0.03) (0.30) (3.64) (2.36) (0.99)
===============================================================================================================
Total distributions (0.03) (0.32) (3.64) (2.36) (0.99)
===============================================================================================================
Net asset value, end of period $ 21.17 $ 23.85 $ 24.04 $ 23.48 $ 18.97
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) (11.13)% 0.56% 18.76% 37.13% (4.71)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,072,673 $490,118 $259,803 $178,550 $180,258
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net
assets 1.43%(c) 1.39% 1.37% 1.46% 1.56%(d)
===============================================================================================================
Ratio of net investment income
(loss) to average net assets (0.40)%(c) (0.22)% 0.38% (0.07)% (1.09)%
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
_______________________________________________________________________________________________________________
===============================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges.
(c) Ratios are based on average daily net assets of $810,880,938.
(d) Ratio includes waiver and expense reductions. Ratio of expense to average net assets excluding waiver and expense reduction was 1.57%.
CLASS B
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 22.03 $ 22.36 $ 22.21 $ 18.16 $ 20.31
--------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.14)(a) (0.38)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) (2.35) 0.16 3.86 6.55 (0.78)
========================================================================================================
Total from investment
operations (2.57) (0.03) 3.79 6.41 (1.16)
========================================================================================================
Less distributions from net
realized gains (0.03) (0.30) (3.64) (2.36) (0.99)
========================================================================================================
Net asset value, end of period $ 19.43 $ 22.03 $ 22.36 $ 22.21 $ 18.16
________________________________________________________________________________________________________
========================================================================================================
Total return(b) (11.69)% (0.10)% 17.98% 36.25% (5.41)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $500,166 $333,783 $210,608 $151,392 $165,447
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average
net assets 2.08%(c) 2.05% 2.02% 2.11% 2.21%(d)
========================================================================================================
Ratio of net investment income
(loss) to average net assets (1.05)%(c) (0.87)% (0.27)% (0.72)% (1.74)%
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
________________________________________________________________________________________________________
========================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $450,650,215.
(d) Ratio includes waiver and expense reductions. Ratio of expense to average net assets excluding waiver and expense reduction was 2.22%.
CLASS C
-----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.00 $ 22.33 $ 22.19 $19.02
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.10)(a)
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.34) 0.16 3.85 5.63
======================================================================================================================
Total from investment operations (2.56) (0.03) 3.78 5.53
======================================================================================================================
Less distributions from net realized gains (0.03) (0.30) (3.64) (2.36)
======================================================================================================================
Net asset value, end of period $ 19.41 $ 22.00 $ 22.33 $22.19
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) (11.66)% (0.10)% 17.95% 29.98%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $161,487 $68,085 $19,466 $1,564
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets 2.08%(c) 2.05% 2.02% 2.11%(d)
======================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.05)%(c) (0.87)% (0.27)% (0.72)%(d)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 38% 68% 72% 90%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America. Does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $122,458,622.
(d) Annualized.
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------
Net asset value, beginning of period $ 24.54
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.26)
===========================================================================
Total from investment operations (3.33)
===========================================================================
Less distributions from net realized gains (0.03)
===========================================================================
Net asset value, end of period $ 21.18
___________________________________________________________________________
===========================================================================
Total return(b) (13.59)%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,786
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets 1.58%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (0.55)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 38%
___________________________________________________________________________
===========================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $840,074.
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 consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R
------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no
initial sales deferred sales deferred sales deferred sales contingent
charge for certain charge charge on charge on deferred sales
purchases(2,3) redemptions within redemptions within charge(2)
six years one year(5)
- Generally, lower - 12b-1 fee of 0.35% - 12b-1 fee of 1.00% - 12b-1 fee of 1.00% - 12b-1 fee of 0.50%
distribution and
service (12b-1)
fee than Class B,
Class C or Class R
shares (See "Fee
Table and Expense
Example")
- Does not convert - Converts to Class - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only
appropriate for appropriate for limited to amounts appropriate for available to the
long-term short-term less than $250,000 short-term following types of
investors investors investors retirement plans:
(i) all section
401 and 457 plans,
(ii) section 403
plans sponsored by
section 501(c)(3)
organizations, and
(iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) 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 at the end of the month which is seven years after the date on 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 the end of the month which is eight years after the date on which you purchased your original shares.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) 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
Sales charges on the 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.
MCF--05/03
CATEGORY I INITIAL SALES CHARGES
---------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
---------------------------------------------------------------
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
---------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
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:
YEAR SINCE PURCHASE MADE CLASS B CLASS C ---------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None ---------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
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
MCF--05/03
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.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) 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 other 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 privileges; 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 Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
-------------------------------------------------------------------------------------------------------------------------
|
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
MCF--05/03
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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 Telephone Open your account using one of the Select the AIM Bank Connection(SM)
methods described above. option on your completed account
application or complete an AIM Bank
Connection form. Mail the application
or form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
SYSTEMATIC PURCHASE 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 $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase 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 a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
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; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
MCF--05/03
(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 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 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. 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 CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase $1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
MCF--05/03
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
|
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
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.
Through a Financial Consultant Contact your financial 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 or our AIM 24-hour
Automated Investor Line. 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 $250,000;
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. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.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 $250,000; and (4) you have already
provided proper bank information. 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.
|
MCF--05/03
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 REDEMPTIONS
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
Redemption 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.
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 $250,000;
(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 PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
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.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B and Class C shares only) 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.
MCF--05/03
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 under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund; or
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund).
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 into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge 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 initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares; or
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash
MCF--05/03
Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II 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 terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
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 you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
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
MCF--05/03
quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. 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 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 may 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 order. 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. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--05/03
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
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
|
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 publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com MCCE-PRO-1
AIM SMALL CAP GROWTH FUND
May 1, 2003
Prospectus
AIM Small Cap Growth Fund seeks to provide long-term
growth of capital.
This prospectus contains important information about the Class A, B, C and R 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.
As of the end of business on March 18, 2002, this fund was closed to new investors.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 5 Portfolio Managers 5 OTHER INFORMATION 5 ------------------------------------------------------ Sales Charges 5 Dividends and Distributions 5 Fund Closure 5 FINANCIAL HIGHLIGHTS 7 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Purchasing Shares A-3 Redeeming Shares A-5 Exchanging Shares A-8 Pricing of Shares A-9 Taxes A-10 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, 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 Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. 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.
The fund's investment objective is long-term growth of capital. 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 80% of its assets in securities of small-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investment may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
The fund may also invest up to 20% of its assets in equity securities of issuers that have market capitalizations, at the time of purchase, outside of the range of market capitalizations of companies included in the Russell 2000--Registered Trademark-- Index, and in investment-grade non-convertible debt securities, U.S. government securities and high-quality money market instruments. The fund may also invest up to 25% of its total assets in foreign securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting investments, the portfolio managers seek to identify those companies that have strong earnings momentum or demonstrate other potential for growth of capital. The portfolio managers anticipate that the fund, when fully invested, will generally be comprised of companies that are currently experiencing a greater than anticipated increase in earnings. The portfolio managers allocate investments among fixed-income securities based on their views as to the best values then available in the marketplace. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. This is especially true with respect to equity securities of smaller companies, whose prices may go up and down more than equity securities of larger, more- established companies. Also, since equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the portfolio to sell securities at a desirable price.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1996................................................................... 13.81%
1997................................................................... 16.22%
1998................................................................... 23.15%
1999................................................................... 90.64%
2000................................................................... -0.74%
2001................................................................... -13.79%
2002................................................................... -28.01%
|
The Class A shares' year-to-date total return as of March 31, 2003 was -4.06%.
During the periods shown in the bar chart, the highest quarterly return was 38.10% (quarter ended December 31, 1999) and the lowest quarterly return was -24.41% (quarter ended September 30, 2001).
(1) A significant portion of the fund's returns during certain periods prior to 2001 was attributable to its investments in initial public offerings (IPOs). These investments had a magnified impact when the fund's asset base was relatively small. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return. For additional information regarding the impact of IPO investments on the fund's performance, please see the "Financial Highlights" section of this prospectus.
PERFORMANCE TABLE(1)
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads. The indices do not reflect payments of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
(for the periods ended 5 SINCE INCEPTION
December 31, 2002) 1 YEAR YEARS INCEPTION DATE
--------------------------------------------------------------------------------
Class A 10/18/95
Return Before Taxes (31.96)% 6.45% 9.04%
Return After Taxes
on Distributions (31.96) 5.65 7.95
Return After Taxes
on Distributions
and Sale of Fund
Shares (19.62) 5.04 7.05
Class B 10/18/95
Return Before Taxes (32.15) 6.57 9.14
Class C 05/03/99
Return Before Taxes (29.28) -- (0.08)
Class R(2) 10/18/95(2)
Return Before Taxes (28.21) 7.47 9.73
--------------------------------------------------------------------------------
S&P 500(3) (22.09) (0.58) 7.64(7) 10/31/95(7)
Russell
2000--Registered
Trademark-- Index(4) (20.48) (1.36) 5.05(7) 10/31/95(7)
Russell
2000--Registered
Trademark-- Growth
Index(5) (30.26) (6.59) (0.66)(7) 10/31/95(7)
Lipper Small-Cap
Growth Fund Index(6) (27.63) (1.22) 3.74(7) 10/31/95(7)
--------------------------------------------------------------------------------
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only and after-tax returns for Class B, C and R shares will vary.
(1) A significant portion of the fund's returns during certain periods prior to 2001 was attributable to its investments in IPOs. These investments had a magnified impact when the fund's asset base was relatively small. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return. For additional information regarding the impact of IPO investments on the fund's performance, please see the "Financial Highlights" section of this prospectus.
(2) The returns shown for these periods are the blended returns of the historical performance of the fund's Class R shares since their inception and the restated historical performance of the fund's Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. The inception date shown in the table is that of the fund's Class A shares. The inception date of the fund's Class R shares is June 3, 2002.
(3) 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. The fund has elected to use the Standard & Poor's 500 Index as its broad-based index rather than the Russell 2000--Registered Trademark-- Index because the Standard & Poor's 500 Index is a more widely recognized gauge of U.S. stock market performance. The fund has also included the Russell 2000--Registered Trademark-- Growth Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Small-Cap Growth Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(4) The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
(5) The Russell 2000--Registered Trademark-- Growth Index measures the performance of those Russell 2000--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values.
(6) The Lipper Small-Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Small-Cap Growth category. These funds typically invest in stocks with market capitalizations below $1 Billion at the time of purchase and have an above-average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's SmallCap 600 Index.
(7) The average annual total return given is since the date closest to the inception date of the classes with the longest performance history.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) CLASS A CLASS B CLASS C CLASS R -------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None None Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is less) None(1,2) 5.00% 1.00% None(3) -------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) -------------------------------------------------------------------------------- (expenses that are deducted from fund assets) CLASS A CLASS B CLASS C CLASS R -------------------------------------------------------------------------------- Management Fees 0.71% 0.71% 0.71% 0.71% Distribution and/or Service (12b-1) Fees 0.35 1.00 1.00 0.50 Other Expenses(5) 0.37 0.37 0.37 0.37 Total Annual Fund Operating Expenses(6) 1.43 2.08 2.08 1.58 -------------------------------------------------------------------------------- |
(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 1.00% contingent deferred sales charge (CDSC) at the time of redemption.
(2) Effective November 1, 2002, if you are a retirement plan participant and you bought $1,000,000 or more of Class A shares, you may pay a 1.00% CDSC if a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the distributor paid a concession to the dealer of record and a total redemption of the retirement plan assets occurs within 12 months from the date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown in the table.
(5) Other Expenses for Class R shares are based on estimated average net assets for the current fiscal year.
(6) The distributor has agreed to limit Class A shares Rule 12b-1 distribution plan payments to 0.25% during the periods the fund is closed to new investors. Total Annual Fund Operating Expenses for Class A shares restated for this agreement are 1.33%. This agreement may be terminated or modified at any time.
You may also be charged a transaction or other fee by the financial institution managing your account.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $688 $978 $1,289 $2,169
Class B 711 952 1,319 2,244
Class C 311 652 1,119 2,410
Class R 161 499 860 1,878
--------------------------------------------------------------------------------
|
You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Class A $688 $978 $1,289 $2,169
Class B 211 652 1,119 2,244
Class C 211 652 1,119 2,410
Class R 161 499 860 1,878
--------------------------------------------------------------------------------
|
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2002, the advisor received compensation of 0.71% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual member(s) of the team who is primarily responsible for the management of the fund's portfolio is
- Ryan E. Crane, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1994.
He is assisted by the Mid Cap Growth and Small Cap Growth Teams. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SALES CHARGES
Purchases of Class A shares of AIM Small Cap Growth Fund are subject to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge 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.
FUND CLOSURE
Due to the sometimes limited availability of common stocks of smaller companies that meet the investment criteria for the fund, the fund discontinued public sales of its shares to new investors on the close of business on March 18, 2002. Investors should note that the fund reserves the right to refuse any order that might disrupt the efficient management of the fund.
The following types of investors may continue to invest in the fund if they were invested in the fund on March 18, 2002 and remain invested in the fund after that date:
(i) Existing shareholders of the fund;
(ii) Existing shareholders of the fund who open other accounts in their name;
(iii) The following plans and programs:
- Retirement plans maintained pursuant to Section 401 of the Internal Revenue Code ("the Code");
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non qualified deferred compensation plans maintained pursuant to Section 83 of the Code; and
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Future investments in the fund made by existing brokerage firm wrap programs are at the discretion of A I M Distributors, Inc. (the distributor). Please contact the distributor for approval.
The following types of investors may open new accounts in the fund, if approved by the distributor:
- Retirement plans maintained pursuant to Section 401 of the Code;
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non qualified deferred compensation plans maintained pursuant to Section 83 of the Code; and
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Such plans and programs that are considering the fund as an investment option should contact the distributor for approval.
During this closed period, the fund may impose different standards for additional investments. Also, during this closed period, the Rule 12b-1 fees for Class A shares will be reduced from 0.35% to 0.25% of the fund's average daily net assets attributable to Class A shares. The Rule 12b-1 fees for Class B, Class C and Class R shares will not be reduced during this closed period.
The fund may resume sales of shares to other new investors at some future date if the Board of Trustees determines that it would be in the best interest of the shareholders.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report which is available upon request.
A significant portion of the fund's returns was attributable to its investments in IPOs during certain fiscal years prior to 2001, including the fiscal year ended 2000, which had a magnified impact on the fund due to its relatively small asset base during this period. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return.
CLASS A
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.67 $ 29.81 $ 31.87 $ 17.03 $ 14.27
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.18)(a) (0.13) (0.09)(a) (0.19)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.01) (3.93) (0.12) 15.47 3.45
================================================================================================================================
Total from investment operations (7.20) (4.11) (0.25) 15.38 3.26
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 18.47 $ 25.67 $ 29.81 $ 31.87 $ 17.03
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.05)% (13.79)% (0.74)% 90.64% 23.15%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $790,700 $679,104 $566,458 $428,378 $24,737
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.35%(c) 1.31% 1.13% 1.54% 1.76%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.43%(c) 1.39% 1.23% 1.54% 2.20%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.91)%(c) (0.70)% (0.40)% (0.38)% (1.29)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include sales charges.
(c) Ratios are based on average net assets of $763,169,831.
CLASS B
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.48 $ 28.64 $ 30.92 $ 16.64 $ 14.06
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.40) (0.24)(a) (0.29)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.07) 15.06 3.37
================================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 14.82 3.08
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 17.49 $ 24.48 $ 28.64 $ 30.92 $ 16.64
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.55)% (14.42)% (1.48)% 89.40% 22.22%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $152,577 $212,958 $231,293 $240,150 $26,448
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19% 2.40%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19% 2.85%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)% (1.96)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and does not include contingent deferred sales charges.
(c) Ratios are based on average daily net assets of $194,477,505.
CLASS C
----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
------------------------------------- DECEMBER 31,
2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.47 $ 28.63 $ 30.91 $ 19.03
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.39) (0.17)(a)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.08) 12.59
========================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 12.42
========================================================================================================================
Less distributions from net realized gains -- (0.03) (1.81) (0.54)
========================================================================================================================
Net asset value, end of period $ 17.48 $ 24.47 $ 28.63 $ 30.91
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) (28.57)% (14.43)% (1.48)% 65.56%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $41,693 $46,833 $41,738 $40,530
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19%(d)
------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19%(d)
========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)%(d)
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 22% 37% 62% 56%
________________________________________________________________________________________________________________________
========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America. Does not include contingent deferred sales charges and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $51,698,285.
(d) Annualized.
CLASS R
----------------------
JUNE 3, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.64
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a)
======================================================================================
Net losses on securities (both realized and unrealized) (4.07)
======================================================================================
Total from investment operations (4.20)
======================================================================================
Net asset value, end of period $ 18.44
______________________________________________________________________________________
======================================================================================
Total return(b) (18.55)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,301
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.61%(c)
--------------------------------------------------------------------------------------
Without fee waivers 1.61%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (1.17)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $407,028.
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 consult your financial advisor as to which class is most suitable for you. In addition, you should consider the factors below.
CLASS A(1) CLASS A3 CLASS B CLASS C CLASS R
------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no
initial sales deferred sales deferred sales deferred sales contingent
charge for certain charge charge on charge on deferred sales
purchases(2,3) redemptions within redemptions within charge(2)
six years one year(5)
- Generally, lower - 12b-1 fee of 0.35% - 12b-1 fee of 1.00% - 12b-1 fee of 1.00% - 12b-1 fee of 0.50%
distribution and
service (12b-1)
fee than Class B,
Class C or Class R
shares (See "Fee
Table and Expense
Example")
- Does not convert - Converts to Class - Does not convert - Does not convert
to Class A shares A shares at the to Class A shares to Class A shares
end of the month
which is eight
years after the
date on which
shares were
purchased along
with a pro rata
portion of its
reinvested
dividends and
distributions(4)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only
appropriate for appropriate for limited to amounts appropriate for available to the
long-term short-term less than $250,000 short-term following types of
investors investors investors retirement plans:
(i) all section
401 and 457 plans,
(ii) section 403
plans sponsored by
section 501(c)(3)
organizations, and
(iii) IRA
rollovers from
such plans if an
AIM Fund was
offered
------------------------------------------------------------------------------------------------------------
|
Certain AIM Funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for details.
(1) As of the close of business on October 30, 2002, Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.
(2) A contingent deferred sales charge may apply in some cases.
(3) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
(4) 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 at the end of the month which is seven years after the date on 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 the end of the month which is eight years after the date on which you purchased your original shares.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares) 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
Sales charges on the 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.
MCF--05/03
CATEGORY I INITIAL SALES CHARGES
---------------------------------------------------------------
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) OFFERING PRICE INVESTMENT
---------------------------------------------------------------
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
---------------------------------------------------------------
|
(1) AIM Opportunities I Fund will not accept any single purchase order in excess of $250,000.
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
CATEGORY III INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
-------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------
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
------------------------------------------------------------
|
SHARES SOLD WITHOUT A SALES CHARGE
You will not pay an initial sales charge on purchases of Class A shares of AIM
Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund.
You will not pay an initial sales charge or a contingent deferred sales charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II Funds at net asset value. However, if you redeem these shares
prior to 18 months after the date of purchase, they will be subject to a CDSC of
1%.
If you made a Large Purchase of Class A shares of Category III Funds at net asset value during the period November 15, 2001 through October 30, 2002, such shares will be subject to a 0.25% CDSC if you redeem them prior to 12 months after the date of purchase.
If you currently own Class A shares of a Category I, II or III Fund and make additional purchases (through October 30, 2002 for Category III Funds only) at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to a CDSC (an 18-month, 1% CDSC for Category I and II Fund shares, and a 12-month, 0.25% CDSC for Category III Fund shares). The CDSC for Category III Fund shares will not apply to additional purchases made prior to November 15, 2001 or after October 30, 2002.
Some retirement plans can purchase Class A shares at their net asset value per share. Effective November 1, 2002, if the distributor paid a concession to the dealer of record in connection with a Large Purchase of Class A shares by a retirement plan, the Class A shares may be subject to a 1% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the plan's initial purchase.
You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
The distributor may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
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:
YEAR SINCE PURCHASE MADE CLASS B CLASS C ---------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None ---------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If the
distributor pays a concession to the dealer of record, however, the Class R
shares are subject to a 0.75% CDSC at the time of redemption if all retirement
plan assets are redeemed within 12 months from the date of the retirement plan's
initial purchase.
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
MCF--05/03
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.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM Floating Rate Fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges pursuant to Rights of Accumulation or Letters of Intent.
RIGHTS OF ACCUMULATION
You may combine your new purchases of Class A shares with shares currently owned
(Class A, B, C or R) 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 other 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 privileges; 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 Class C shares of an AIM Fund other than AIM Short Term Bond Fund and you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund;
- if you redeem Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, at any time, less than all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a retirement plan and your plan redeems, after having held them for more than one year from the date of the plan's initial purchase, all of the Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you redeem shares acquired through reinvestment of dividends and distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares at reduced or without sales charges. Consult the fund's Statement of Additional Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
There are no minimum investments with respect to Class R shares for AIM Fund accounts. The minimum investments with respect to Class A, A3, B and C shares for AIM Fund accounts (except for investments in AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund) are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Savings Plans (money-purchase/profit sharing plans, 401(k) $ 0 ($25 per AIM Fund investment for $25
plans, Simplified Employee Pension (SEP) accounts, Salary salary deferrals from Savings
Reduction (SARSEP) accounts, Savings Incentive Match Plans Plans)
for Employee IRA (Simple IRA) accounts, 403(b) or 457 plans)
Systematic Purchase Plan 50 25
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
-------------------------------------------------------------------------------------------------------------------------
|
The minimum initial investment for AIM Opportunities I Fund, AIM Opportunities II Fund and AIM Opportunities III Fund (the Special Opportunities Funds) accounts is $10,000. The minimum subsequent investment is $1,000. The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
MCF--05/03
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application and Mail your check and the remittance slip
check to the transfer agent, A I M Fund from your confirmation statement to the
Services, Inc., P.O. Box 4739, Houston, transfer agent.
TX 77210-4739.
By Wire Mail completed account application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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 Telephone Open your account using one of the Select the AIM Bank Connection(SM)
methods described above. option on your completed account
application or complete an AIM Bank
Connection form. Mail the application
or form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
Call the AIM 24-hour Automated Investor
Line. You may place your order after
you have provided the bank instructions
that will be requested.
By Internet Open your account using one of the Access your account at
methods described above. www.aiminvestments.com. The proper bank
instructions must have been provided on
your account. You may not purchase
shares in AIM prototype retirement
accounts on the internet.
-------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
SYSTEMATIC PURCHASE 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 $25 ($1,000 for any of
the Special Opportunities Funds). You may stop the Systematic Purchase 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 a
Special Opportunities Fund is $1,000. The minimum amount you can exchange to
another AIM Fund is $25.
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; and (b) in the AIM Fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
MCF--05/03
(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 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 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. 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 CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE PRIOR TO NOVEMBER 15, 2001.
If you purchased $1,000,000 or more of Class A shares of any AIM Fund at net asset value prior to November 15, 2001, or entered into a Letter of Intent prior to November 15, 2001 to purchase $1,000,000 or more of Class A shares of a Category I, II or III Fund at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category III - No CDSC
Fund(1) Fund(1)
- Class A shares of AIM Tax-Exempt
Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE ON AND AFTER NOVEMBER 15, 2001
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds), or if you make additional purchases of Class A shares on and after November 15, 2001 (and through October 30, 2002 with respect to Class A shares of Category III Funds) at net asset value, your shares may be subject to a CDSC upon redemption, as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category I - Class A shares of Category I or - 1% if shares are redeemed
or II Fund II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(1) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category III - Class A shares of Category I or - 1% if shares are redeemed
Fund II Fund within 18 months of initial
purchase of Category III Fund
shares
- Class A shares of Category III - Class A shares of Category III - 0.25% if shares are redeemed
Fund Fund(1) within 12 months of initial
- Class A shares of AIM Tax-Exempt purchase of Category III Fund
Cash Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
|
(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund may not be exchanged for Class A shares of a Category III Fund.
MCF--05/03
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE FOR PURCHASES MADE AFTER OCTOBER 30, 2002
If you purchase $1,000,000 or more of Class A shares of any AIM Fund on or after October 31, 2002, or if you make additional purchases of Class A shares on and after October 31, 2002 at net asset value, your shares may be subject to a CDSC upon redemption as described below.
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
I or II Fund or II Fund within 18 months of initial
- Class A shares of Category III purchase of Category I or II
Fund(2) Fund shares
- AIM Cash Reserve Shares of AIM
Money Market Fund
- Class A shares of Category - Class A shares of Category I - 1% if shares are redeemed
III Fund(1) or II Fund within 18 months of initial
purchase of Category III Fund
shares
|
SHARES
INITIALLY SHARES HELD CDSC APPLICABLE UPON
PURCHASED AFTER AN EXCHANGE REDEMPTION OF SHARES
--------- ----------------- --------------------
- Class A shares of Category - Class A shares of Category III - No CDSC
III Fund(1) Fund(2)
- Class A shares of AIM Tax-
Exempt Cash Fund
- AIM Cash Reserve Shares of AIM
Money Market
|
(1) As of the close of business on October 30, 2002, only existing shareholders
of Class A shares of a Category III Fund may purchase such shares.
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III
Fund may not be exchanged for Class A shares of Category III Fund.
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.
Through a Financial Consultant Contact your financial 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 or our AIM 24-hour
Automated Investor Line. 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 $250,000;
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. You
may, with limited exceptions, redeem from an
IRA account by telephone. Redemptions from
other types of retirement accounts must be
requested in writing.
By Internet Place your redemption request at
www.aiminvestments.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 $250,000; and (4) you have already
provided proper bank information. 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.
|
MCF--05/03
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 REDEMPTIONS
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
Redemption 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.
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 $250,000;
(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 PRIVILEGES
You may, within 120 days after you sell shares (except Class R shares, Class A shares of AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM Fund at net asset value in an identically registered account.
You may, within 120 days after you sell some but not all of your Class A shares of a Category III Fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III Fund at net asset value in an identically registered account.
The reinvestment amount must meet the subsequent investment minimum as indicated in the section "Purchasing Shares".
If you paid an initial sales charge on any reinstated amount, you will receive credit on purchases of Class A shares of a Category I or II Fund.
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.
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B and Class C shares only) 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.
MCF--05/03
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 under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another AIM Fund.
You may also exchange:
(1) Class A shares of an AIM Fund for AIM Cash Reserve Shares of AIM Money Market Fund;
(2) Class A shares of an AIM Fund (excluding AIM Limited Maturity Treasury Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate Fund) for Class A3 shares of an AIM Fund;
(3) Class A3 shares of an AIM Fund for AIM Cash Reserve shares of AIM Money Market Fund;
(4) Class A3 shares of an AIM Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund);
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM Fund; or
(6) AIM Cash Reserve Shares of AIM Money Market Fund for Class A shares of any AIM Fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, effective February 17, 2003, and AIM Tax-Exempt Cash Fund).
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 into shares that are subject to a CDSC, we will begin the holding period for purposes of calculating the CDSC on the date you made your initial purchase.
EXCHANGES NOT SUBJECT TO A SALES CHARGE
You will not pay an initial sales charge when exchanging:
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
(a) Class A shares of another AIM Fund;
(b) AIM Cash Reserve Shares of AIM Money Market Fund; or
(c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund.
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund with an initial sales charge 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 initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for
(a) Class A shares of an AIM Fund subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to an initial sales charge (excluding Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free Intermediate Fund for
(a) AIM Cash Reserve Shares of AIM Money Market Fund; or
(b) Class A shares of AIM Tax-Exempt Cash Fund.
You will not pay a CDSC or other sales charge when exchanging:
(1) Class A shares for other Class A shares;
(2) Class B shares for other Class B shares;
(3) Class C shares for other Class C shares; or
(4) Class R shares for other Class R shares.
EXCHANGES NOT PERMITTED
Certain classes of shares are not covered by the exchange privilege. You may not exchange:
(1) Class A shares of a Category I or II Fund for Class A shares of a Category III Fund after February 16, 2003; or
(2) Class A shares of a Category III Fund for Class A shares of another Category III Fund after February 16, 2003.
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a contingent deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III Funds purchased at net asset value for Class A shares of a Category I or II Fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund;
(4) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of Category I or II Funds that are subject to a CDSC; or
(5) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash
MCF--05/03
Fund for Class A shares of Category III Funds that are subject to a CDSC.
For shares purchased on or after November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II Funds (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other AIM Fund (i) subject to an initial sales charge or (ii) purchased at net asset value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM Fund or for Class A shares of any AIM Fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II Fund, and exchanged those shares for AIM Cash Reserve Shares of AIM Money Market Fund, you may further exchange the AIM Cash Reserve Shares for Class A shares of a Category I or II 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 terminate this privilege at any time. The AIM Fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by applicable law, but may impose changes at any time for emergency purposes.
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 you do not hold physical share certificates and you provide the proper identification information.
EXCHANGING CLASS B, CLASS C AND CLASS R SHARES
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
MCF--05/03
quotations are readily available at market value. The AIM Funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. 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 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 may 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 order. 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. In addition, the preceding discussion concerning the taxability of fund dividends and distributions and of redemptions and exchanges of AIM Fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--05/03
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
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
|
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 publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com SCG-PRO-1
STATEMENT OF
ADDITIONAL INFORMATION
AIM GROWTH SERIES
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE CLASS A, CLASS B, CLASS C AND CLASS R SHARES OF EACH PORTFOLIO (EACH A "FUND," COLLECTIVELY THE "FUNDS") OF AIM GROWTH SERIES LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES FOR THE CLASS A, CLASS B, CLASS C AND CLASS R SHARES OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF ANY PROSPECTUS FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
A I M FUND SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 2003, RELATES TO THE CLASS A, CLASS B, CLASS C AND CLASS R SHARES OF THE FOLLOWING PROSPECTUSES:
FUND DATED
---- -----
AIM BASIC VALUE FUND MAY 1, 2003
AIM MID CAP CORE EQUITY FUND MAY 1, 2003
AIM SMALL CAP GROWTH FUND MAY 1, 2003
|
AIM GROWTH SERIES
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION ABOUT THE TRUST........................................................................... 1
Fund History......................................................................................... 1
Shares of Beneficial Interest........................................................................ 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS...................................................... 3
Classification....................................................................................... 3
Investment Strategies and Risks...................................................................... 3
Equity Investments.......................................................................... 6
Foreign Investments......................................................................... 6
Debt Investments for Equity Funds........................................................... 8
Other Investments........................................................................... 9
Investment Techniques....................................................................... 9
Derivatives................................................................................. 14
Additional Securities or Investment Techniques.............................................. 20
Fund Policies........................................................................................ 20
Temporary Defensive Positions........................................................................ 22
Portfolio Turnover................................................................................... 22
MANAGEMENT OF THE TRUST....................................................................................... 22
Board of Trustees.................................................................................... 22
Management Information............................................................................... 23
Trustee Ownership of Fund Shares............................................................ 24
Factors Considered in Approving the Investment Advisory Agreement........................... 24
Compensation......................................................................................... 25
Retirement Plan For Trustees................................................................ 25
Deferred Compensation Agreements............................................................ 25
Purchases of Class A Shares of the Funds at Net Asset Value................................. 26
Codes of Ethics...................................................................................... 26
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES........................................................... 26
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................ 26
Investment Advisor................................................................................... 26
Service Agreements................................................................................... 28
Other Service Providers.............................................................................. 28
BROKERAGE ALLOCATION AND OTHER PRACTICES...................................................................... 29
Brokerage Transactions............................................................................... 29
Commissions.......................................................................................... 29
Brokerage Selection.................................................................................. 30
Directed Brokerage (Research Services)............................................................... 31
Regular Brokers or Dealers........................................................................... 31
Allocation of Portfolio Transactions................................................................. 31
Allocation of Initial Public Offering ("IPO") Transactions........................................... 31
PURCHASE, REDEMPTION AND PRICING OF SHARES.................................................................... 32
Purchase and Redemption of Shares.................................................................... 32
Offering Price....................................................................................... 48
Redemption In Kind................................................................................... 49
|
Backup Withholding................................................................................... 49
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS...................................................................... 50
Dividends and Distributions.......................................................................... 50
Tax Matters.......................................................................................... 51
DISTRIBUTION OF SECURITIES.................................................................................... 57
Distribution Plans................................................................................... 57
Distributor.......................................................................................... 59
CALCULATION OF PERFORMANCE DATA............................................................................... 61
|
APPENDICES: RATINGS OF DEBT SECURITIES................................................................................... A-1 TRUSTEES AND OFFICERS........................................................................................ B-1 TRUSTEE COMPENSATION TABLE................................................................................... C-1 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................................................... D-1 MANAGEMENT FEES.............................................................................................. E-1 ADMINISTRATIVE SERVICES FEES ................................................................................ F-1 BROKERAGE COMMISSIONS ....................................................................................... G-1 DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS............. H-1 AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS...................................... I-1 ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS................................................ J-1 TOTAL SALES CHARGES.......................................................................................... K-1 PERFORMANCE DATA............................................................................................. L-1 FINANCIAL STATEMENTS......................................................................................... FS |
GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Growth Series (the "Trust") is a Delaware statutory trust which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of three separate portfolios: AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund (each a "Fund" and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002, as amended (the "Trust Agreement"), the Board of Trustees is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust.
The Trust was originally organized on February 19, 1985 as a Massachusetts business trust. The Trust reorganized as a Delaware business trust on May 29, 1998. The following Funds were included in the reorganization: AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund. All historical financial and other information contained in this Statement of Additional Information for periods prior to May 29, 1998 relating to these Funds (or a class thereof) is that of the predecessor funds (or the corresponding class thereof) of GT Global Growth Series, the Trust predecessor. Effective June 5, 2000, AIM Basic Value Fund no longer invests all of its investable assets in the Value Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Value Portfolio. Effective September 11, 2000, AIM Small Cap Growth Fund no longer invests all of its investable assets in the Small Cap Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Small Cap Portfolio. Prior to September 8, 1998, AIM Basic Value fund was known as AIM America Value Fund and AIM Small Cap Growth Fund was known as AIM Small Cap Equity Fund. Prior to July 1, 2002, AIM Mid Cap Core Equity Fund was known as AIM Mid Cap Equity Fund (which was known as AIM Mid Cap Growth Fund prior to September 8, 1998).
Effective as of the close of business on March 18, 2002, AIM Small Cap
Growth Fund has been closed to new investors. The following types of investors
may continue to invest in AIM Small Cap Growth Fund if they were invested in the
Fund on the date the Fund discontinued sales to new investors and remain
invested in the Fund: existing shareholders of the Fund; existing shareholders
of the Fund who open other accounts in their name; retirement plans maintained
pursuant to Section 401 of the Internal Revenue Code ("the Code"); retirement
plans maintained pursuant to Section 403 of the Code, to the extent they are
maintained by organizations established under Section 501(c)(3) of the Code;
retirement plans maintained pursuant to Section 457 of the Code; non-qualified
deferred compensation plans maintained pursuant to Section 83 of the Code; and
Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Future investments in the Fund made by existing brokerage firm wrap programs
will be at the discretion of A I M Distributors, Inc. ("AIM Distributors"). The
following types of investors may open new accounts in AIM Small Cap Growth Fund,
if approved by AIM Distributors: retirement plans maintained pursuant to Section
401 of the Code; retirement plans maintained pursuant to Section 403 of the
Code, to the extent they are maintained by organizations established under
Section 501(c)(3) of the Code; retirement plans maintained pursuant to Section
457 of the Code; non-qualified deferred compensation plans maintained pursuant
to Section 83 of the Code; and Qualified Tuition Programs maintained pursuant to
Section 529 of the Code. Such plans and programs that are considering AIM Small
Cap Growth Fund as an investment option should contact AIM Distributors for
approval.
SHARES OF BENEFICIAL INTEREST
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.
The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject
only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund 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 Fund offers five separate classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class shares. This Statement of Additional Information relates solely to the Class A, Class B, Class C, and Class R shares of the Funds. The Institutional Class shares of the Funds are intended for use by certain eligible institutional investors. Shares of the Institutional Class of Funds are available for banks and trust companies acting in a fiduciary or similar capacity, bank and trust company common and collective trust funds, banks and trust companies investing for their own account, entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies), retirement plans and platform sponsors with which AIM Distributors has entered into an agreement.
Each class of shares represents interests in the same portfolio of investments. Differing sales charges and expenses 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.
Each share of a Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Because Class B shares automatically convert to Class A shares at month-end eight years after the date of purchase, the Funds' distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B shareholders must also approve any material increase in distribution fees submitted to Class A or shareholders of that Fund. A pro rata portion of shares from reinvested dividends and distributions convert along with the Class B shares.
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 shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, 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. 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 is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected 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 ("Disabling Conduct"). The Trust Agreement provides for indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. The Trust Agreement also authorizes the purchase of liability insurance on behalf of trustees and officers.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds is "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and investment techniques used by AIM in managing The AIM Family of Funds(R). The table has been marked to indicate those securities and investment techniques that AIM may use to manage a Fund. A Fund may not use all of these techniques at any one time. A Fund's transactions in a particular security or use of a particular technique is subject to limitations imposed by a Fund's investment objective, policies and restrictions described in that Fund's Prospectus and/or this Statement of Additional Information, as well as federal securities laws. The Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy.
AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------
FUND
----
SECURITY/
INVESTMENT AIM BASIC VALUE AIM MID CAP CORE EQUITY
TECHNIQUE FUND FUND AIM SMALL CAP GROWTH FUND
----------------------------------------------------------------------------------------------------
EQUITY INVESTMENTS
----------------------------------------------------------------------------------------------------
Common Stock X X X
----------------------------------------------------------------------------------------------------
Preferred Stock X X X
----------------------------------------------------------------------------------------------------
Convertible X X X
Securities
----------------------------------------------------------------------------------------------------
Alternative Entity X X X
Securities
----------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
----------------------------------------------------------------------------------------------------
Foreign Securities X X X
----------------------------------------------------------------------------------------------------
Foreign Government X
Obligations
----------------------------------------------------------------------------------------------------
Foreign Exchange X X X
Transactions
----------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUNDS
----------------------------------------------------------------------------------------------------
U.S. Government X X X
Obligations
----------------------------------------------------------------------------------------------------
Investment Grade X X X
Corporate Debt
Obligations
----------------------------------------------------------------------------------------------------
Liquid Assets X X X
----------------------------------------------------------------------------------------------------
Junk Bonds
----------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
----------------------------------------------------------------------------------------------------
REITs X X X
----------------------------------------------------------------------------------------------------
Other Investment X X X
Companies
----------------------------------------------------------------------------------------------------
Defaulted Securities
----------------------------------------------------------------------------------------------------
Municipal Forward
Contracts
----------------------------------------------------------------------------------------------------
Variable or Floating
Rate Instruments
----------------------------------------------------------------------------------------------------
Indexed Securities
----------------------------------------------------------------------------------------------------
Zero-Coupon and
Pay-in-Kind
Securities
----------------------------------------------------------------------------------------------------
Synthetic Municipal
Instruments
----------------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------
Delayed Delivery X X X
Transactions
----------------------------------------------------------------------------------------------------
When-Issued Securities X X X
----------------------------------------------------------------------------------------------------
Short Sales X X X
----------------------------------------------------------------------------------------------------
Margin Transactions
----------------------------------------------------------------------------------------------------
Swap Agreements X X X
----------------------------------------------------------------------------------------------------
Interfund Loans X X X
----------------------------------------------------------------------------------------------------
|
AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------
FUND
----
SECURITY/
INVESTMENT AIM BASIC VALUE AIM MID CAP CORE EQUITY
TECHNIQUE FUND FUND AIM SMALL CAP GROWTH FUND
----------------------------------------------------------------------------------------------------
Borrowing X X X
----------------------------------------------------------------------------------------------------
Lending Portfolio X X X
Securities
----------------------------------------------------------------------------------------------------
Repurchase Agreements X X X
----------------------------------------------------------------------------------------------------
Reverse Repurchase X X X
Agreements
----------------------------------------------------------------------------------------------------
Dollar Rolls X X X
----------------------------------------------------------------------------------------------------
Illiquid Securities X X X
----------------------------------------------------------------------------------------------------
Rule 144A Securities X X X
----------------------------------------------------------------------------------------------------
Unseasoned Issuers
----------------------------------------------------------------------------------------------------
Portfolio Transactions
----------------------------------------------------------------------------------------------------
Sale of Money
Market Securities
----------------------------------------------------------------------------------------------------
Standby Commitments
----------------------------------------------------------------------------------------------------
DERIVATIVES
----------------------------------------------------------------------------------------------------
Equity-Linked X X X
Derivatives
----------------------------------------------------------------------------------------------------
Put Options X X X
----------------------------------------------------------------------------------------------------
Call Options X X X
----------------------------------------------------------------------------------------------------
Straddles X X X
----------------------------------------------------------------------------------------------------
Warrants X X X
----------------------------------------------------------------------------------------------------
Futures Contracts X X X
and Options on
Futures Contracts
----------------------------------------------------------------------------------------------------
Forward Currency X X X
Contracts
----------------------------------------------------------------------------------------------------
Cover X X X
----------------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------------
Commercial Bank X X X
Obligations
----------------------------------------------------------------------------------------------------
|
Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. 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.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary Receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
On January 1, 1999, certain members of the European Economic and Monetary Union ("EMU"), established a common European currency known as the "euro" and each member's local currency became a denomination of the euro. Each participating country (currently, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain) has replaced its local currency with the euro effective January 1, 2002.
Risks of Developing Countries. The Funds may each invest up to 5% of their total assets in securities of companies located in developing countries. Investments in developing countries present risks greater than, and in addition to, those presented by investments 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 Funds. 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 or less diverse, 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.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing countries.
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments for Equity Funds
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider: (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate.
LIQUID ASSETS. For cash management purposes, the Funds may hold a portion of their assets in cash or cash equivalents, including shares of affiliated money market funds. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, bankers' acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments, participation interests in corporate loans, and municipal obligations).
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. 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 maintain an 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/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), 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.
The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (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.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leveraging technique.
Investment in securities on a 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 delayed
delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued 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 sell another security in order to honor a when-issued commitment. 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 assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. A Fund is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. A Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in a Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount a Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining
the number of shares to be sold short against a Fund's position in a convertible security, the anticipated fluctuation in the conversion premium is considered. A Fund may also make short sales to generate additional income from the investment of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and in an amount equal to, the securities sold short. To secure its obligation to deliver the securities sold short, a Fund will segregate with its custodian an equal amount to the securities sold short or securities convertible into or exchangeable for such securities. A Fund may pledge no more than 10% of its total assets as collateral for short sales against the box.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin.
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 include: (i) 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"; (ii) 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 (iii) 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 fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Most swap agreements entered into by a Fund would calculate the obligations 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 to 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."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other AIM Funds and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund loans are outstanding, a Fund cannot make any additional investments. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of a Fund to lend its securities to other AIM Funds is subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated 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. Each Fund may lend portfolio securities to the extent of one-third of its total assets.
The Fund 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 any cash collateral. A Fund will not have the right to vote securities while they are being lent, but it can call a loan in anticipation of an important vote. Any cash collateral pursuant to these loans would be invested in short-term money market instruments or Affiliated Money Market Funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned increases and the collateral is not increased accordingly or in the event of default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during the Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, a Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days, and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A Fund may
employ reverse repurchase agreements (i) for temporary emergency purposes, such
as to meet unanticipated net redemptions so as to avoid liquidating other
portfolio securities during unfavorable market conditions; (ii) to cover
short-term cash requirements resulting from the timing of trade settlements; or
(iii) to take advantage of market situations where the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the transaction. At the time it enters into a reverse
repurchase agreement, a Fund will segregate liquid assets having a dollar value
equal to the repurchase price, and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which
it is obligated to repurchase the securities, or that the other party may default on its obligation, so that the Fund is delayed or prevented from completing the transaction. Reverse repurchase agreements are considered borrowings by a Fund under the 1940 Act.
DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage security to a financial institution such as a broker-dealer or a bank, with an agreement to repurchase a substantially similar (i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are purchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, a Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for a Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund"s use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund"s obligation to repurchase the securities. At the time the Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Fund typically enters into dollar roll transactions to enhance the Fund's return either on an income or total return basis or to manage pre-payment risk. Dollar rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A, and thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are illiquid. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board of Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Funds' restriction on investment in
illiquid securities. Determination of whether a Rule 144A security is liquid or
not is a question of fact. In making this determination AIM will consider the
trading markets for the specific security taking into account the unregistered
nature of a Rule 144A security. In addition, AIM could consider the (i)
frequency of trades and quotes; (ii) number of dealers and potential purchasers;
(iii) dealer undertakings to make a market; and (iv) nature of the security and
of market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
Derivatives
The Funds may each invest in forward currency contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with each Fund's investments. The Funds may also invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a securities portfolio designed to replicate the composition and performance of a particular index. Equity-Linked Derivatives are exchange traded. The performance results of Equity-Linked Derivatives will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by the Equity-Linked Derivatives. 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 Optimised 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 and, therefore, a Fund may be subject to the same investment restrictions with Equity-Linked Derivatives as with other investment companies. See "Other Investment Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise
price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy, and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write
call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. The Fund, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Fund's overall position. A 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.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all of the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward currency contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make
an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Fund's investment policies with respect to bank obligations, obligations of foreign branches of U.S. banks and of foreign banks are obligations of the issuing bank and may be general obligations of the parent bank. Such obligations, however, may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject the Funds to investment risks that are different in some respects from those of investments in obligations of domestic issuers. Although a Fund typically will acquire obligations issued and supported by the credit of U.S. or foreign banks having total assets at the time of purchase of $1 billion or more, this $1 billion figure is not an investment policy or restriction of any Fund. For the purposes of calculation with respect to the $1 billion figure, the assets of a bank will be deemed to include the assets of its U.S. and non-U.S. branches.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares. Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or 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. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) 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) 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.
(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.
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 AIM 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. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other investment companies or their series portfolios that have AIM or an affiliate of AIM as an investment 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 or when any borrowings from an AIM Advised Fund are outstanding.
(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 an 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.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Mid Cap Core Equity Fund normally invests at least 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) AIM Small Cap Growth Fund normally invests at least 80% of its assets in securities of small-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt instruments. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
PORTFOLIO TURNOVER
The portfolio turnover rate for AIM Basic Value Fund increased significantly from the fiscal year ended December 31, 2001 to the fiscal year ended December 31, 2002. AIM Basic Value Fund experienced an increase in portfolio turnover during this period because increased market volatility created more opportunities for fund managers to purchase stocks at what they viewed as compelling valuations. This is consistent with the Fund's investment strategy. The portfolio turnover rate for AIM Basic Value Fund decreased significantly from the fiscal year ended December 31, 2000 to the fiscal year ended December 31, 2001. AIM Basic Value Fund experienced a decline in portfolio turnover during this period because the portfolio managers of the Fund continued to view portfolio holdings purchased in prior periods as good investments for the Fund, and significant cash inflows during the year allowed the portfolio managers of the Fund to make other portfolio adjustments without selling existing holdings.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Funds and the Trust is vested in the 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 objective(s), restrictions and policies of the applicable Fund and to the general supervision of the 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. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during at least the last five years and certain other information concerning them are set forth in Appendix B.
The standing committees of the Board of Trustees are the Audit Committee, the Investments Committee, the Valuation Committee and the Committee on Directors/Trustees.
The members of the Audit Committee are Frank S. Bayley, Bruce L. Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M. Fields, Lewis F. Pennock and Louis S. Sklar, Dr. Prema Mathai-Davis and Ruth H. Quigley. The Audit Committee is responsible for: (i) the appointment, compensation and oversight of any independent auditors employed by the Fund (including resolution of disagreements between Fund management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; (ii) overseeing the financial reporting process of the Fund; (iii) monitoring the process and resulting financial statements prepared by Fund management to promote accuracy of financial reporting and asset valuation; and (iv) preapproving permissible non-audit services that are provided to the Fund by its independent auditors. During the fiscal year ended December 31, 2002, the Audit Committee held six meetings.
The members of the Investments Committee are Messrs. Bayley, Crockett, Dowden, Dunn, Fields, Pennock and Sklar (Chair), Carl Frischling, Dr. Mathai-Davis (Vice Chair) and Miss Quigley. 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. During the fiscal year ended December 31, 2002, the Investments Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies. During the fiscal year ended December
31, 2002, the Valuation Committee held one meeting.
The members of the Committee on Directors/Trustees are Messrs. Bayley,
Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar, Dr.
Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of the
Fund for election or appointment (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of the Fund at meetings called for the election of trustees;
(ii) nominating persons who are not interested persons of the fund for selection
as, members of each committee of the Board, including without limitation, the
Audit Committee, the Committee on Directors/Trustees, the Investments Committee
and the Valuation Committee, and to nominate persons for selection as chair and
vice chair of each such committee: (iii) reviewing from time to time the
compensation payable to the independent trustees and making recommendations to
the Board regarding compensation; (iv) reviewing and evaluating from time to
time the functioning of the Board and
the various committees of the Board; (v) selecting independent legal counsel to the independent trustees and approving the compensation paid to independent legal counsel; and (vi) approving the compensation paid to independent counsel and other advisers, if any, to the Audit Committee of the Fund. During the fiscal year ended December 31, 2002, the Committee on Directors/Trustees held five meetings.
The Committee on Directors/Trustees 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 Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustee within the AIM Funds complex, is set forth in Appendix B.
Factors Considered in Approving the Investment Advisory Agreement
The advisory agreement with AIM was re-approved for each Fund by the Trust's Board at a meeting held on May 14-15, 2002. In evaluating the fairness and reasonableness of the advisory agreement, the Board of Trustees considered a variety of factors for each Fund, including: the requirements of each Fund for investment supervisory and administrative services; the quality of AIM's services, including a review of each Fund's investment performance and AIM's investment personnel; the size of the fees in relationship to the extent and quality of the investment advisory services rendered; fees charged to AIM's other clients; fees charged by competitive investment advisors; the size of the fees in light of services provided other than investment advisory services; the expenses borne by each Fund as a percentage of its assets and relationship to contractual limitations; any fee waivers (or payments of Fund expenses) by AIM; AIM's profitability; the benefits received by AIM from its relationship to each Fund, including soft dollar arrangements, and the extent to which each Fund shares in those benefits; the organizational capabilities and financial condition of AIM and conditions and trends prevailing in the economy, the securities markets and the mutual fund industry; and the historical relationship between each Fund and AIM.
In considering the above factors, the Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of each Fund may be invested in money market funds advised by AIM pursuant to the terms of an exemptive order. The Board found that each Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that each Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board further determined that the proposed securities lending program and related procedures with respect to each of the lending Funds is in the best interests of each lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of each lending Fund and its respective shareholders.
After consideration of these factors, the Board found that: (i) the services provided to each Fund and its shareholders were adequate; (ii) the agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the agreements would have been obtained through arm's length negotiations. The Board therefore concluded that each Fund's advisory agreement was in the best interests of such Fund and its shareholders and continued the agreement for an additional year.
COMPENSATION
Each trustee who is not affiliated with AIM 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. 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.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002 is found in Appendix C.
Retirement Plan For Trustees
The trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM. The retirement plan includes a retirement policy as well as retirement benefits for the non-AIM-affiliated trustees.
The retirement policy permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the trustees may extend from time to time the retirement date of a trustee.
Annual retirement benefits are available to each non-AIM-affiliated
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a
predecessor fund) for a Covered Fund. The retirement benefits will equal 75% of
the trustee's annual retainer paid or accrued by any Covered Fund to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The annual retirement benefits are
payable in quarterly installments for a number of years equal to the lesser of
(i) ten or (ii) the number of such trustee's credited years of service. A death
benefit is also available under the plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased trustee's retirement benefits for the
same length of time that the trustee would have received based on his or her
service. A trustee must have attained the age of 65 (55 in the event of death or
disability) to receive any retirement benefit.
Deferred Compensation Agreements
Messrs. 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 have the option to 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 have the option to 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 up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. 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 retirement benefits commence under the Plan. The Board, in its sole discretion, also 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. 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.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase
Class A shares of the Funds without paying an initial sales charge. AIM
Distributors permits such purchases because there is a reduced sales effort
involved in sales to such purchasers, thereby resulting in relatively low
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund - Purchases of Class A Shares at Net Asset Value."
CODES OF ETHICS
AIM, the Trust and AIM Distributors have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading. Personal trading, including personal trading involving securities that may be purchased or held by a Fund, is permitted by persons covered under the relevant Codes subject to certain restrictions; however those persons are generally required to pre-clear all security transactions with the Compliance Officer or his designee and to report all transactions on a regular basis.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix D. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 190 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, 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 is also responsible for furnishing to the Funds, at AIM'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.
The Master Investment Advisory Agreement provides that each Fund will pay or cause to be paid all expenses of such 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 trustee 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.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its advisory agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the following annual rates, based on the average daily net assets of each Fund during the year:
--------------------------------------------------------------------------------
FUND NAME NET ASSETS ANNUAL RATE
--------------------------------------------------------------------------------
AIM Basic Value Fund First $500 million 0.725%
AIM Mid Cap Core Equity Fund Next $500 million 0.70%
AIM Small Cap Growth Fund Next $500 million 0.675%
Amount over $1.5 billion 0.65%
--------------------------------------------------------------------------------
|
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 Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed, effective July 1, 2002, to waive a portion of advisory fees payable by each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's investment of uninvested cash in an Affiliated Money Market Fund. See "Investment Strategies and Risks - Other Investments - Other Investment Companies."
The management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended December 31 are found in Appendix E.
SECURITIES LENDING ARRANGEMENTS. If a Fund engages in securities
lending, AIM will provide the Fund investment advisory services and related
administrative services. The 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.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the advisory agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board of Trustees. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three fiscal years ended December 31 are found in Appendix F.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. A I M Fund Services, Inc. ("AFS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.
The Transfer Agency and Service Agreement between the Trust and AFS provides that AFS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AFS will receive a per account fee plus out-of-pocket expenses to process orders for purchases, redemptions and exchanges of shares; prepare and transmit payments for dividends and distributions declared by the Funds; maintain shareholder accounts and provide shareholders with information regarding the Funds and their accounts. AFS 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.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536 has entered into an agreement with the Trust (and certain other AIM Funds), PFPC Inc. (formerly known as First Data Investor Service Group) and Financial Data Services, Inc., pursuant to which MLPF&S is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Fund(s).
Primerica Shareholder Services, Inc. ("PSS"), [3120 Breckinridge Boulevard, Duluth, Georgia 30099-0001] has also entered into an agreement with the Trust (and certain other AIM Funds) and AFS pursuant to which PSS is paid a per account fee to perform certain shareholder sub-accounting services for its customers who beneficially own shares of the Fund(s).
CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for retail purchases. The Bank of New York, 100 Church Street, New York, New York 10286, also serves as sub-custodian to facilitate cash management.
The Custodian is authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country; the Custodian is responsible for monitoring eligible foreign securities depositories.
Under its contract with the Trust, the Custodian maintains the portfolio securities of the Funds, administers the purchases and sales of portfolio securities, collects interest and dividends and other distributions made on the securities held in the portfolios of the Funds and performs other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets.
AUDITORS. The Funds' independent public accountants are responsible for auditing the financial statements of the Funds. The Board of Trustees has selected PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas, 77002, as the independent public accountants to audit the financial statements of the Funds.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
AIM makes 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 "Brokerage Selection" below.
Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected at either net prices without commissions, but which include compensation to the broker-dealer in the form of a mark up or mark down, or on an agency basis, which involves the payment of negotiated brokerage commissions to the broker-dealer, including electronic communication networks.
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.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended December 31 are found in Appendix G.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
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 AIM Funds from the SEC are met. In addition, a Fund may purchase or
sell a security from or to another AIM Fund or account (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of Directors/Trustees of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses.
BROKERAGE SELECTION
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)(1), 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-dealers may communicate such information electronically, orally, in written form or on computer software. Research services may also include the providing of electronic communications of trade information and the providing of custody services, as well as the providing of equipment used to communicate research information and 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.
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 other mutual funds advised by AIM or A I M Capital Management, Inc. (collectively, 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, consistent with obtaining best execution. AIM will not use a specific formula in connection with any of these considerations to determine the target levels.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended December 31, 2002 are found in Appendix H.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended December 31, 2002 is found in Appendix H.
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 results in transactions which 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. This procedure would apply to transactions in both equity and fixed income securities.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in IPOs. Purchases of IPOs by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. It shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO, and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular IPO by reviewing a number of factors, including suitability of the investment with the AIM Fund's or account's investment objective, policies and strategies, the liquidity of the AIM Fund or account if such investment is purchased, and whether the portfolio manager intends to hold the security as a long-term investment. The allocation of securities issued in IPOs will be made to eligible AIM Funds and accounts in a manner designed to be fair and equitable for the eligible AIM Funds and accounts, and so that there is equal allocation of IPOs over the longer term. Where multiple funds or accounts are eligible, rotational participation may occur, based on the extent to which an AIM Fund or account has participated in previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund and account will be placed in one of four tiers, depending upon each AIM Fund's or account's
asset level. The AIM Funds and accounts in the tier containing funds and accounts with the smallest asset levels will participate first, each receiving a 40 basis point allocation (rounded to the nearest share round lot that approximates 40 basis points) (the "Allocation"), based on that AIM Fund's or account's net assets. This process continues until all of the AIM Funds and accounts in the four tiers receive their Allocations, or until the shares are all allocated. Should securities remain after this process, eligible AIM Funds and accounts will receive their Allocations on a straight pro rata basis. In addition, Incubator Funds, as described in AIM's Incubator and New Fund Investment Policy, will each be limited to a 40 basis point allocation only. Such allocations will be allocated to the nearest share round lot that approximates 40 basis points.
When any AIM Funds and/or accounts with substantially identical investment objectives and policies participate in IPOs, they will do so in amounts that are substantially proportionate to each other. In these cases, the net assets of the largest participating AIM Fund will be used to determine in which tier, as described in the paragraph above, such group of AIM Funds or accounts will be placed. If no AIM Fund is participating, then the net assets of the largest account will be used to determine tier placement. The price per share of securities purchased in such IPO transactions will be the same for each AIM Fund and account.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund
INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund and AIM Money Market Fund) is grouped into one of three categories to determine the applicable initial sales charge for its Class A Shares. The sales charge is used to compensate AIM Distributors and participating dealers for their expenses incurred in connection with the distribution of the Funds' shares. You may also be charged a transaction or other fee by the financial institution managing your account.
Class A shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund are sold without an initial sales charge.
CATEGORY I FUNDS
AIM Aggressive Growth Fund
AIM Asia Pacific Growth Fund
AIM Basic Value Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Dent Demographic Trends Fund
AIM Emerging Growth Fund
AIM European Growth Fund
AIM European Small Company Fund
AIM Global Utilities Fund
AIM Global Value Fund
AIM International Core Equity Fund
AIM International Emerging Growth Fund
AIM International Growth Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Core Equity Fund
AIM Large Cap Growth Fund
AIM Libra Fund
AIM Mid Cap Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Mid Cap Growth Fund
AIM New Technology Fund
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund
AIM Weingarten Fund
Dealer
Investor's Sales Charge Concession
----------------------- ----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
------------------------- ----- -------- ------
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
|
(1) AIM Opportunities I Fund will not accept any single purchase in excess of $250,000.
CATEGORY II FUNDS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM Developing Markets Fund
AIM Global Aggressive Growth Fund
AIM Global Energy Fund
AIM Global Financial Services Fund
AIM Global Growth Fund
AIM Global Health Care Fund
AIM Global Income Fund
AIM Global Science and
Technology Fund
AIM Global Trends Fund
AIM High Income Municipal Fund
AIM High Yield Fund
AIM High Yield Fund II
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM Strategic Income Fund
AIM Total Return Bond Fund
Dealer
Investor's Sales Charge Concession
----------------------- ----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
------------------ ----- -------- -----
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
|
CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
Dealer
Investor's Sales Charge Concession
----------------------- ----------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
------------------ ----- -------- -----
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
|
Beginning on October 31, 2002 Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors. Current investors must maintain a share balance in order to continue to make incremental purchases.
LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or more of Class A Shares of a Category I, II or III Fund do not pay an initial sales charge. In addition, investors who currently own Class A shares of Category I, II, or III Funds and make additional purchases that result in account balances of $1,000,000 or more do not pay an initial sales charge on the additional purchases. The additional purchases, as well as initial purchases of $1,000,000 or more, are referred to as Large Purchases ("Large Purchases"). If an investor makes a Large Purchase of Class A shares of a Category I or II Fund, however, each share issued will generally be subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor redeems those shares within 18 months after purchase. Large Purchases of Class A shares of Category III Funds made on or after November 15, 2001 and through October 30, 2002 will be subject to a 0.25% CDSC if the investor redeems those shares within 12 months after purchase.
AIM Distributors may pay a dealer concession and/or advance a service fee on Large Purchases, as set forth below. Exchanges between the AIM Funds may affect total compensation paid.
AIM Distributors may make the following payments to dealers of record
for Large Purchases of Class A shares of Category I or II Funds by investors
other than (i) retirement plans that are maintained pursuant to Sections 401 and
457 of the Internal Revenue Code of 1986, as amended (the Code), and (ii)
retirement plans that are maintained pursuant to Section 403 of the Code if the
employer or plan sponsor is a tax-exempt organization operated pursuant to
Section 501(c)(3) of the Code:
PERCENT OF PURCHASE
1% of the first $2 million
plus 0.80% of the next $1 million plus 0.50% of the next $17 million plus 0.25% of amounts in excess of $20 million
If (i) the amount of any single purchase order plus (ii) the net asset value of all other shares owned by the same customer submitting the purchase order on the day on which the purchase order is received equals or exceeds $1,000,000, the purchase will be considered a "jumbo accumulation
purchase." With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases, made by the same customer over the life of his or her account(s).
If an investor made a Large Purchase of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay an additional dealer concession of 0.75% upon exchange.
If an investor makes a Large Purchase of Class A shares of a Category I or II Fund on and after November 15, 2001 and exchanges those shares for Class A shares of a Category III Fund, AIM Distributors will not pay any additional dealer compensation upon the exchange. Beginning February 17, 2003, Class A shares of a Category I or II Fund may not be exchanged for Class A shares of a Category III Fund.
If an investor makes a Large Purchase of Class A3 shares of a Category III Fund on and after October 31, 2002 and exchanges those shares for Class A shares of a Category I or II Fund, AIM Distributors will pay 1.00% of such purchase as dealer compensation upon the exchange. The Class A shares of the Category I or II Fund received in exchange generally will be subject to a 1.00% CDSC if the investor redeems such shares within 18 months from the date of exchange.
If an investor makes a Large Purchase of Class A shares of a Category III Fund and exchanges those shares for Class A shares of another Category III Fund, AIM Distributors will not pay and additional dealer concession upon the exchange. Beginning February 17, 2003, Class A shares of a Category III Fund may not be exchanged for Class A shares of another Category III Fund.
PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. Effective November 1, 2002, for purchases of Class A shares of Category I and II Funds, AIM Distributors may make the following payments to investment dealers or other financial service firms for sales of such shares at net asset value ("NAV") to certain retirement plans provided that the applicable dealer of record is able to establish that the retirement plan's purchase of Class A shares is a new investment (as defined below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at NAV by the following types of retirement plans: (i) all plans maintained pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii) an exchange of AIM Fund shares, or (iii) the repayment of one or more retirement plan loans that were funded through the redemption of AIM Fund shares. If AIM Distributors pays a dealer concession in connection with a plan's purchase of Class A shares at NAV, such shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing on the date the plan first invests in Class A shares of an AIM Fund. If the applicable dealer of record is unable to establish that a plan's purchase of Class A shares at NAV is a new investment, AIM Distributors will not pay a dealer concession in connection with such purchase and such shares will not be subject to a CDSC.
With regard to any individual jumbo accumulation purchase, AIM Distributors may make payment to the dealer of record based on the cumulative total of jumbo accumulation purchases made by the same plan over the live of the plan's account(s).
PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in the tables above, purchases of certain amounts of AIM Fund shares may reduce the initial sales charges. These reductions are available to purchasers that meet the qualifications listed below. We will refer to purchasers that meet these qualifications as "Qualified Purchasers."
INDIVIDUALS
- an individual (including his or her spouse or domestic partner, and children);
- any trust established exclusively for the benefit of an individual;
- a retirement plan established exclusively for the benefit of an individual, specifically including, but not limited to, a Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh plan, or a tax-sheltered 403(b)(7) custodial account; and
- a qualified tuition plan account, maintained pursuant to
Section 529 of the Code, or a Coverdell Education Savings
Account, maintained pursuant to Section 530 of the Code (in
either case, the account must be established by an individual
or have an individual named as the beneficiary thereof).
EMPLOYER-SPONSORED RETIREMENT PLANS
- a retirement plan maintained pursuant to Sections 401, 403 (only if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP and SIMPLE IRA plans) or 457 of the Code, if:
a. the employer or plan sponsor submits all contributions for all participating employees in a single contribution transmittal (the AIM Funds will not accept separate contributions submitted with respect to individual participants);
b. each transmittal is accompanied by a single check or wire transfer; and
c. if the AIM Funds are expected to carry separate accounts in the names of each of the plan participants, (i) the employer or plan sponsor notifies AIM Distributors in writing that the separate accounts of all plan participants should be linked, and (ii) all new participant accounts are established by submitting an appropriate Account Application on behalf of each new participant with the contribution transmittal.
TRUSTEES AND FIDUCIARIES
- a trustee or fiduciary purchasing for a single trust, estate or fiduciary account.
OTHER GROUPS
- any organized group of persons, whether incorporated or not, purchasing AIM Fund shares through a single account, provided that:
a. the organization has been in existence for at least six months; and
b. the organization has some purpose other than the purchase at a discount of redeemable securities of a registered investment company.
HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following sections discuss different ways that a Qualified Purchaser can qualify for a reduction in the initial sales charges for purchases of Class A shares of the AIM Funds.
LETTERS OF INTENT
A Qualified Purchaser may pay reduced initial sales charges by (i) indicating on the Account Application that he, she or it intends to provide a Letter of Intent ("LOI") and (ii) subsequently fulfilling the conditions of that LOI.
The LOI confirms the total investment in shares of the AIM Funds that the Qualified Purchaser intends to make within the next 13 months. By marking the LOI section on the account application and by signing the account application, the Qualified Purchaser indicates that he, she or it understands and agrees to the terms of the LOI and is bound by the provisions described below:
Calculating the Initial Sales Charge
- 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 (to determine what the applicable public offering price is, look at the sales charge table in the section on "Initial Sales Charges" above).
- 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 below 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.
Calculating the Number of Shares to be Purchased
- 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.
- Purchases made more than 90 days before signing an LOI will be applied toward the completion of the LOI based on the value of the shares purchased that is calculated at the public offering price on the effective date of the LOI.
- If a purchaser meets the original obligation at any time during the 13-month period, he or she may revise the intended investment amount upward by submitting a written and signed request. This revision will not change the original expiration date.
- The Transfer Agent will process necessary adjustments upon the expiration or completion date of the LOI.
Fulfilling the Intended Investment
- 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 purchaser will have to pay the increased amount of sales charge.
- To assure compliance with the provisions of the 1940 Act, the Transfer Agent will escrow in the form of shares an appropriate dollar amount (computed to the nearest full share) out of
the initial purchase (or subsequent purchases if necessary). 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 sales charge on the amount actually purchased. If the purchaser does not pay such difference within 20 days of the expiration date, he or she 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.
Canceling the LOI
- If at any time before completing the LOI Program, the purchaser wishes to cancel the agreement, he or she 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, the LOI will be automatically canceled. 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.
Other Persons Eligible for the LOI Privilege
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.
LOIs and Contingent Deferred Sales Charges
If an investor entered into an LOI to purchase $1,000,000 or more of Class A shares of a Category III Fund on and after November 15, 2001 and through October 30, 2002, such shares will be subject to a 12-month, 0.25% CDSC. Purchases of Class A shares of a Category III Fund made pursuant to an LOI to purchase $1,000,000 or more of shares entered into prior to November 15, 2001 or after October 30, 2002 will not be subject to this CDSC. All LOIs to purchase $1,000,000 or more of Class A shares of Category I and II Funds are subject to an 18-month, 1% CDSC.
RIGHTS OF ACCUMULATION
A Qualified Purchaser may also qualify for reduced initial sales charges based upon his, her or its existing investment in shares of any of the AIM Funds at the time of the proposed purchase. 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 owned by such purchaser, calculated at their then current public offering price.
If a purchaser qualifies for a reduced sales charge, the reduced sales charge applies to the total amount of money being invested, even if only a portion of that amount exceeds the breakpoint for the reduced sales charge. 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 the Transfer Agent 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.
Rights of Accumulation are also available to holders of the Connecticut General Guaranteed Account, established for tax-qualified group annuities, for contract purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund is at net asset value, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 18 month holding period (12 months for Category III Fund shares). For new purchases of Class A shares of Category III Funds at net asset value made on and after November 15, 2001 and through October 30, 2002, the newly purchased shares will be subject to a CDSC if the investor redeems them prior to the end of the 12 month holding period.
OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed above, 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 to the reduced sales charge based on the definition of a Qualified Purchaser listed above. No person or entity may distribute shares of the AIM Funds without payment of the applicable sales charge other than to Qualified Purchasers.
Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash Reserve Shares of AIM Money Market Fund, and Class B and Class C shares of AIM Floating Rate Fund will not be taken into account in determining whether a purchase qualifies for a reduction in initial sales charges.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits certain categories of persons to purchase Class A shares of AIM Funds without paying an initial sales charge. These are typically categories of persons whose transactions involve little expense, such as:
- Persons who have a relationship with the funds or with AIM and its affiliates, and are therefore familiar with the funds, and who place unsolicited orders directly with AIM Distributors; or
- Programs for purchase that involve little expense because of the size of the transaction and shareholder records required.
AIM Distributors believes that it is appropriate and in the Funds' best interests that such persons, and certain other persons whose purchases result in relatively low expenses of distribution, be permitted to purchase shares through AIM Distributors without payment of a sales charge.
Accordingly, the following purchasers will not pay initial sales charges on purchases of Class A shares because there is a reduced sales effort involved in sales to these purchasers:
- AIM Management and its affiliates, or their clients;
- Any current or retired officer, director or employee (and members of their immediate family) of AIM Management, its affiliates or The AIM Family of Funds(R), and any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons;
- Any current or retired officer, director, or employee (and members of their immediate family) of DST Systems, Inc. or Personix, a division of Fiserv Solutions, Inc.;
- Sales representatives and employees (and members of their immediate family) of selling group members of financial institutions that have arrangements with such selling group members;
- Purchases through approved fee-based programs;
- Employer-sponsored retirement plans that are Qualified Purchasers, as defined above, provided that:
a. a plan's initial investment is at least $1 million;
b. the employer or plan sponsor signs a $1 million LOI;
c. there are at least 100 employees eligible to participate in the plan; or
d. all plan transactions are executed through a single omnibus account per AIM Fund and the financial institution or service organization has entered into the appropriate agreement with the distributor; further provided that
e. retirement plans maintained pursuant to Section 403(b) of the Code are not eligible to purchase shares at NAV based on the aggregate investment made by the plan or the number of eligible employees unless the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code; and
f. purchases of AIM Opportunities I Fund by all retirement plans are subject to initial sales charges;
- 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;
- 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;
- Unitholders of G/SET series unit investment trusts investing proceeds from such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund; provided, however, prior to the termination date of the trusts, a unitholder may invest proceeds from the redemption or repurchase of his units only when the investment in shares of AIM Weingarten Fund and AIM Constellation Fund is effected within 30 days of the redemption or repurchase;
- A shareholder of a fund that merges or consolidates with an AIM Fund or that sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
- Shareholders of the GT Global funds as of April 30, 1987 who since that date continually have owned shares of one or more of these funds;
- 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;
- 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;
- Qualified Tuition Programs created and maintained in accordance with Section 529 of the Code; and
- Participants in select brokerage programs for retirement plans and rollover IRAs who purchase shares through an electronic brokerage platform offered by entities with which AIM Distributors has entered into a written agreement.
As used above, immediate family includes an individual and his or her spouse or domestic partner, children, parents and parents of spouse or domestic partner.
In addition, an investor may acquire shares of any of the AIM Funds at net asset value in connection with:
- the reinvestment of dividends and distributions from a Fund;
- exchanges of shares of certain Funds;
- use of the reinstatement privilege; or
- a merger, consolidation or acquisition of assets of a Fund.
PAYMENTS TO DEALERS. 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 1933 Act.
In addition to, or instead of, amounts paid to dealers as a sales commission, 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. 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 or of average daily net assets of the AIM Fund attributable to that particular dealer. 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. 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.
Purchases of Class B Shares
Class B shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within six years after purchase. See the Prospectus for additional information regarding contingent deferred sales charges. 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 will equal 4.00% of the purchase price and will consist of a sales commission equal to 3.75% plus an advance of the first year service fee of 0.25%.
Purchases of Class C Shares
Class C shares are sold at net asset value, and are not subject to an initial sales charge. Instead, investors may pay a CDSC if they redeem their shares within the first year after purchase (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for additional information regarding this CDSC. AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds (except for Class C shares of AIM Short Term Bond Fund) at the time of such sales. Payments will equal 1.00% of the purchase price and will consist of a
sales commission of 0.75% plus an advance of the first year service fee of 0.25%. 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.
AIM Distributors may pay dealers and institutions who sell Class C shares of AIM Short Term Bond Fund, an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence immediately.
Purchases of Class R Shares
Class R shares are sold at net asset value, and are not subject to an initial sales charge. If AIM Distributors pays a concession to the dealer of record, however, the Class R shares are subject to a 0.75% CDSC at the time of redemption if all retirement plan assets are redeemed within one year from the date of the retirement plan's initial purchase. For purchases of Class R shares of Category I or II Funds, AIM Distributors may make the following payments to dealers of record provided that the applicable dealer of record is able to establish that the purchase of Class R shares is a new investment or a rollover from a retirement plan in which an AIM Fund was offered as an investment option:
PERCENT OF CUMULATIVE PURCHASES
0.75% of the first $5 million
plus 0.50% of amounts in excess of $5 million
With regard to any individual purchase of Class R shares, AIM Distributors may make payment to the dealer of record based on the cumulative total of purchases made by the same plan over the life of the plan's account(s).
Exchanges
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 fax, telegraph or use overnight courier services to expedite exchanges by mail, which will be effective on the business day received by AFS as long as such request is received prior to the close of the customary trading session of the New York Stock Exchange ("NYSE"). AFS 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.
Redemptions
GENERAL. 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 Funds at (800) 959-4246 and guarantee delivery of all required documents in good order. A repurchase is effected at the net asset value per share of the applicable Fund next determined after the repurchase order is received. Such an arrangement is subject to timely receipt by AFS, the Funds' transfer agent, of all required documents in good order. If such documents are not received within a reasonable time after the order is placed, the order is subject to cancellation. While there is no charge imposed by a Fund or by AIM Distributors (other than any applicable contingent deferred sales charge) when shares are redeemed or repurchased, dealers may charge a fair service fee for handling the transaction.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the date of payment postponed when (a) trading on the NYSE is restricted, as determined by applicable rules and regulations of the SEC, (b) the NYSE is closed for other than customary weekend and holiday closings, (c) the SEC has by order permitted such suspension, or (d) an emergency as determined by the SEC exists making disposition of portfolio securities or the valuation of the net assets of a Fund not reasonably practicable.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an investor appoints AFS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AFS in the designated account(s), present or future, with full power of substitution in the premises. AFS 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 AFS 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. AFS reserves the right to cease to act as attorney-in-fact subject to this appointment, and AIM Distributors reserves the right to modify or terminate the telephone redemption privilege at any time without notice. An investor may elect not to have this privilege by marking the appropriate box on the application. Then any redemptions must be effected in writing by the investor.
SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a shareholder of an AIM Fund to withdraw on a regular basis at least $50 per withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AFS and all dividends and distributions are reinvested in shares of the applicable AIM Fund by AFS. To provide funds for payments made under the Systematic Redemption Plan, AFS redeems sufficient full and fractional shares at their net asset value in effect at the time of each such redemption.
Payments under a Systematic Redemption 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, Class C or Class R shares of the Funds), it is disadvantageous to effect such purchases while a Systematic Redemption Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic Redemption Plan.
Contingent Deferred Sales Charges Imposed upon Redemption of Shares
A CDSC may be imposed upon the redemption of Large Purchases of Class A shares of Category I and II Funds, or upon the redemption of Class B shares or Class C shares (no CDSC applies to Class C shares of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that are subject to a CDSC into AIM Short Term Bond Fund) and, in certain circumstances, upon the redemption of Class R shares. On and after November 15, 2001 and through October 30, 2002, a CDSC also may be imposed upon the redemption of Large Purchases of Class A shares of Category III Funds. See the Prospectus for additional information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a Category I, II or III Fund will not be subject to a CDSC upon the redemption of those shares in the following situations:
- Redemptions of shares of Category I or II Funds held more than 18 months;
- Redemptions of shares of Category III Funds purchased prior to November 15, 2001 or after October 30, 2002;
- Redemptions of shares of Category III Funds purchased on or after November 15, 2001 and through October 30, 2002 and held for more than 12 months;
- Redemptions of shares held by retirement plans in cases where
(i) the plan has remained invested in Class A shares of an AIM
Fund for at least 12 months, or (ii) the redemption is not a
complete redemption of shares held by the plan;
- Redemptions from private foundations or endowment funds;
- Redemptions 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;
- Redemptions of shares of Category I, II or III Funds or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category I or II Fund, unless the shares acquired by exchange (on or after November 15, 2001 and through October 30, 2002 with respect to Category III Funds) are redeemed within 18 months of the original purchase of the exchange of Category I or II Fund shares;
- Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased prior to November 15, 2001;
- Redemptions of shares of Category I or II Funds acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002, unless the shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category III Fund shares;
- Redemptions of shares of Category III Funds, shares of AIM Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund acquired by exchange from Class A shares of a Category III Fund purchased on and after November 15, 2001 and through October 30, 2002, unless the shares acquired by exchange are redeemed within 12 months of the original purchase of the exchanged Category III Fund shares;
- Redemptions of shares of Category I or II Funds acquired by exchange on and after November 15, 2001 from AIM Cash Reserve Shares of AIM Money Market Fund if the
AIM Cash Reserve Shares were acquired by exchange from a Category I or II Fund, unless the Category I or II Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds shares; and
- Redemptions of Category I or II Funds by retirement plan participants resulting from a total redemption of the plan assets that occurs more than one year from the date of the plan's initial purchase.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES. Investors who purchased former GT Global funds Class B shares before June 1, 1998 are subject to the following waivers from the CDSC otherwise due upon redemption:
- Total or partial redemptions resulting from a distribution following retirement in the case of a tax-qualified employer-sponsored retirement;
- 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;
- 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;
- Redemptions made in connection with participant-directed exchanges between options in an employer-sponsored benefit plan;
- Redemptions made for the purpose of providing cash to fund a loan to a participant in a tax-qualified retirement plan;
- 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;
- 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
- Redemptions made by or for the benefit of certain states, counties or cities, or any instrumentalities, departments or authorities thereof where such entities are prohibited or limited by applicable law from paying a sales charge or commission.
CDSCs will not apply to the following redemptions of Class B or Class C shares, as applicable:
- Additional purchases of Class C shares of AIM International Core Equity Fund (formerly known as AIM International Value Fund) and AIM Real Estate Fund by shareholders of record on April 30, 1995, of these Funds, except that shareholders whose broker-dealers maintain a single omnibus account with AFS on behalf of those shareholders, perform sub-accounting functions with respect to those shareholders, and are unable to segregate shareholders of record prior to April 30, 1995, from shareholders whose accounts were opened after that date will be subject to a CDSC on all purchases made after March 1, 1996;
- Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time
of death or initial determination of post-purchase disability;
- Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70 1/2or 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 Code) of the
participant or beneficiary;
- Amounts from a Systematic Redemption Plan of up to an annual amount of 12% of the account value on a per fund basis, at the time the withdrawal plan is established, provided the investor reinvests his dividends;
- Liquidation by the AIM Fund when the account value falls below the minimum required account size of $500; and
- Investment account(s) of AIM.
CDSCs will not apply to the following redemptions of Class C shares:
- A total or partial redemption of shares where the investor's dealer of record notified the distributor prior to the time of investment that the dealer would waive the upfront payment otherwise payable to him;
- A total or partial redemption which is necessary to fund a distribution requested by a participant in a retirement plan maintained pursuant to Section 401, 403, or 457 of the Code;
- Redemptions of Class C shares of an AIM Fund other than AIM Short Term Bond Fund if you received such Class C shares by exchanging Class C shares of AIM Short Term Bond Fund; and
- Redemptions of Class C shares of AIM Short Term Bond Fund unless you received such Class C shares by exchanging Class C shares of another AIM Fund and the original purchase was subject to a CDSC.
CDSCs will not apply to the following redemptions of Class R shares:
- Class R shares where the retirement plan's dealer of record notifies the distributor prior to the time of investment that the dealer waives the upfront payment otherwise payable to him; and
- Redemptions of shares held by retirement plans in cases where
(i) the plan has remained invested in Class R shares of an AIM
Fund for at least 12 months, or (ii) the redemption is not a
complete redemption of all Class R shares held by the plan.
General Information Regarding Purchases, Exchanges and Redemptions
GOOD ORDER. Purchase, exchange and redemption orders must be received in good order. To be in good order, an investor must supply AFS with all required information and documentation, including
signature guarantees when required. In addition, if a purchase of shares is made by check, the check must be received in good order. This means that the check must be properly completed and signed, and legible to AFS in its sole discretion.
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other financial intermediary to ensure that all orders are transmitted on a timely basis to AFS. Any loss resulting from the failure of the dealer or financial intermediary to submit an order within the prescribed time frame will be borne by that dealer or financial intermediary. 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.
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 $250,000 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 AFS' current Signature Guarantee Standards and Procedures, such as certain domestic banks, credit unions, securities dealers, or securities exchanges. AFS 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 TELEPHONE. By signing an account application form, an investor appoints AFS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AFS 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. AFS 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 AFS 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. AFS 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.
INTERNET TRANSACTIONS. An investor may effect transactions in his account through the internet by establishing a Personal Identification Number (PIN). By establishing a PIN, the investor acknowledges and agrees that neither AFS nor AIM Distributors will be liable for any loss, expense or cost arising out of any internet transaction effected by them in accordance with any instructions submitted by a user who transmits the PIN as authentication of his or her identity. 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 the ability to effect internet transactions may be terminated at any time by the AIM Funds.
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that AFS maintains a correct address for his account(s). An incorrect address may cause an investor's account statements and other mailings to be returned to AFS. Upon receiving returned mail, AFS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AFS will retain a shareholder locator service with a national information database to conduct periodic searches for the investor. If the search firm is unable to locate the investor, the search firm will determine whether the investor's account has legally been abandoned. AFS is legally obligated to escheat (or transfer) abandoned property to the appropriate state's unclaimed property administrator in accordance with statutory requirements. The investor's last known address of record determines which state has jurisdiction.
OFFERING PRICE
The following formula may be used to determine the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price ) = Offering Price.
For example, at the close of business on December 31, 2002, AIM Basic Value Fund - Class A shares had a net asset value per share of $21.86. The offering price, assuming an initial sales charge of 5.50%, therefore was $23.13.
Calculation of Net Asset Value
Each Fund determines its net asset value per share 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, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, the Fund will generally use futures and options contract closing prices which are available fifteen (15) minutes after the close of the customary trading session of the NYSE. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles.
Each security (excluding convertible bonds) held by a Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP, 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 securities (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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data.
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 ask 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Foreign securities are converted into U.S. dollars using exchange rates as of the close of the NYSE. Generally, trading in foreign securities, corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of each Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such securities may occur between the times at which such values 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 a development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as of the close of the applicable market, may be adjusted to reflect the fair value of the affected securities as of the close of the NYSE 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 cannot exchange or redeem shares of the Fund.
REDEMPTION IN KIND
AIM intends to redeem all shares of the Funds in cash. It is possible that future conditions may make it undesirable for a Fund to pay for redeemed shares in cash. In such cases, the Fund may make payment in securities or other property. If a Fund has made an election under Rule 18f-1 under the 1940 Act, the Fund is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets 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.
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, generally must withhold as of January 1, 2002, 30% 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; however, the backup withholding rate decreases in phases to 28% for distributions made in the year 2006 and thereafter.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect TIN;
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);
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. AIM or AFS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning withholding.
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 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net investment income dividends and capital gain distributions. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gains by the end of each taxable year. In determining the amount of capital gains, if any, available for distribution, capital gains will be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment". Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested.
Distributions paid by a fund, other than daily dividends, have 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.
Dividends on Class B and Class C shares are expected to be lower than those for Class A shares because of higher distribution fees paid by Class B and Class C shares. Dividends on Class R shares may be lower than those for Class A shares, depending on whether the Class R shares pay higher distribution fees than those for Class A shares. Other class-specific expenses may also affect dividends on shares of those classes. 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 principals under the 1940 Act and the Code.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualifications as such in each of its taxable years. 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 (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) 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 gain 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 gain to redemptions of Fund shares and will reduce the amount of such income and gain 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 gain 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.
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, securities or foreign currencies (to the extent such currency gain is 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 from its business of investing in such stock, securities or currencies (the "Income Requirement"). Under certain circumstances, a Fund may be required to sell portfolio holdings to meet this 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 (the "Asset Diversification Test"). 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 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 of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses.
For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such future contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test.
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. If a Fund purchases a debt obligation that was originally issued at a discount, the Fund is generally required to include in gross income each year the portion of the original issue discount which accrues during such year. In addition, under the rules of Code Section 988, gain or loss recognized on the disposition of a debt obligation denominated in a foreign currency or an option with respect thereto (but only to the extent attributable to changes in foreign currency exchange rates), and gain or loss recognized on the disposition of a foreign currency forward contract or of foreign currency itself, will generally be treated as ordinary income or loss.
Certain 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, a Fund will generally be deemed to have constructively sold such appreciated financial position and will recognize gain as if such position were sold, assigned, or otherwise terminated at its fair market value on the date of such constructive sale (and will take into account any gain for the taxable year which includes such date).
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 that a
Fund holds 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 and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a future
or option is held as an offsetting position and can be considered a straddle
under Section 1092 of the Code, such a straddle will constitute a mixed
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income or long-term capital gain may also differ from the book income of the Fund and may be increased or decreased as compared to a fund that did not engage in such transactions.
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 (excess of capital gains over capital losses) 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
(1) 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 (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (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 generally 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. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity securities and thus may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company 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.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons 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 stock.
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 IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which the Fund will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 20% for noncorporate shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. Conversely, if a Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year will qualify for the 70% dividends received deduction generally available to corporations (other than corporations, such as "S" corporations, which are not eligible for the deduction because of their special characteristics and other than for purposes of special taxes such as the accumulated earnings tax and the personal holding company tax) to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the extent it exceeds, the regular tax and is computed at a maximum rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount. The corporate dividends received deduction is not itself an item of tax preference that must be added back to taxable income or is otherwise disallowed in determining a corporation's AMTI. However, corporate shareholders will generally be required to take the full amount of any dividend received from the Fund into account (without a dividend received deduction) in determining their adjusted current earnings, which are used in computing an additional corporate preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings over its AMTI (determined without regard to this item and the AMTI net operating loss deduction)) that is includable in AMTI. However, certain small corporations are wholly exempt from the AMT.
Distributions by a Fund that do not constitute earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the 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.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to tax at a maximum rate of 20%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
If a shareholder (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. The wash sale rules may also limit the amount of loss that may be taken into account on disposition.
BACKUP WITHHOLDING. The Funds may be required to withhold, as of January 1, 2002, 30% of distributions and/or redemption payments; however, this rate is reduced in phases to 28% for distributions made in the year 2006 and thereafter. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term capital gain) will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the distribution. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gain realized on the redemption of shares of a Fund, capital gain dividends and amounts retained by a Fund that are designated as undistributed net capital gain.
If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required to withhold U.S. federal income tax at a rate of 30% on distributions made on or after January 1, 2002 that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign shareholders may be subject to U.S. withholding tax at a rate of 30% on the income resulting from a Fund's election to treat any foreign income tax paid by it as paid by its shareholders, but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S. tax refund and who are not eligible to obtain a social security number must apply to the IRS for an individual taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please contact your tax advisor or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated rates applicable to U.S. citizens and residents, unless a treaty exception applies. In the absence of a treaty, there is a $13,000 statutory estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund, including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from sources within foreign countries may be subject to foreign income tax withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Funds to a reduced rate of, or exemption from, tax on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of each taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income, or to use it (subject to various Code limitations) as a foreign tax credit against Federal income tax (but not both). No deduction for foreign tax may be claimed by a non-corporate shareholder who does not itemize deductions or who is subject to alternative minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to the limitation that it may not exceed the shareholder's U.S. tax (determined without regard to the availability of the credit) attributable to the shareholder's foreign source taxable income. In determining the source and character of distributions received from a Fund for this purpose, shareholders will be required to allocate Fund distributions according to the source of the income realized by the Fund. Each Fund's gain from the sale of stock and securities and certain currency fluctuation gain and loss will generally be treated as derived from U.S. sources. In addition, the limitation on the foreign tax credit is applied separately to foreign source "passive" income, such as dividend income. Individuals who have no more than $300 ($600 for married persons filing jointly) of creditable foreign tax included on Form 1099 and whose foreign source income is all "qualified passive income" may elect each year to be exempt from the foreign tax credit limitation and will be able to claim a foreign tax credit without filing Form 1116 with its corresponding requirement to report income and tax by country. Moreover, no foreign tax credit will be allowable to any shareholder who has not held his shares of the Fund for at least 16 days during the 30-day period beginning 15 days before the day such shares become ex-dividend with respect to any Fund distribution to which foreign income taxes are attributed (taking into account certain holding period reduction requirements of the Code). Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. 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. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLANS
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Class A shares, Class B shares, Class C shares and Class R shares (collectively the "Plans"). Each Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate, shown immediately below, of the Fund's average daily net assets of the applicable class.
FUND CLASS A CLASS B CLASS C CLASS R
---- ------- ------- ------- -------
AIM Basic Value Fund 0.35% 1.00% 1.00% 0.50%
AIM Mid Cap Core Equity Fund 0.35 1.00 1.00 0.50
AIM Small Cap Growth Fund 0.25 1.00 1.00 0.50
|
All of the Plans compensate AIM Distributors for the purpose of financing any activity which is primarily intended to result in the sale of shares of the Funds. Such activities 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 each Plan.
Amounts payable by a Fund under the Plans need not be directly related to the expenses actually incurred by AIM Distributors on behalf of each Fund. The Plans do not obligate the Funds to reimburse AIM Distributors for the actual expenses AIM Distributors may incur in fulfilling its obligations under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to AIM Distributors at any given time, the Funds will not be obligated to pay more than that fee. If AIM Distributors' expenses are less than the fee it receives, AIM Distributors will retain the full amount of the fee.
AIM Distributors may from time to time waive or reduce any portion of its 12b-1 fee for Class A shares, Class C shares or Class R shares. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM Distributors will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM Distributors and the Fund.
AIM Distributors has agreed to reduce the Rule 12b-1 distribution plan payments for Class A shares of AIM Small Cap Growth Fund from 0.35% to 0.25% during the periods the Fund is closed to new investors. This agreement may be terminated at any time.
The Funds may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares attributable to the customers of selected dealers and financial institutions to such dealers and financial institutions, including AIM Distributors, acting as principal, who furnish continuing personal shareholder services to their customers who purchase and own the applicable class of shares of the Fund. Under the terms of a shareholder service agreement, such personal shareholder services include responding to customer inquiries and providing customers with information about their investments. Any amounts not paid as a service fee under each Plan would constitute an asset-based sales charge.
Under a Shareholder Service Agreement, a Fund agrees to pay periodically fees to selected dealers and other institutions who render the foregoing services to their customers. The fees payable under a Shareholder Service Agreement will be calculated at the end of each payment period for each business day of the Funds during such period at the annual rate specified in each agreement based on the average daily net asset value of the Funds' shares purchased or acquired through exchange. Fees shall be paid only to those selected dealers or other institutions who are dealers or institutions of record at the close of business on the last business day of the applicable payment period for the account in which such Fund's shares are held.
Selected dealers and other institutions entitled to receive compensation for selling Fund shares may receive different compensation for selling shares of one particular class over another. 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 to dealers and other financial institutions under the Plans. These payments are an obligation of the Funds and not of AIM Distributors.
Payments pursuant to the Plans are subject to any applicable limitations imposed by rules of the National Association of Securities Dealers, Inc. ("NASD").
See Appendix I for a list of the amounts paid by each class of shares of each Fund to AIM Distributors pursuant to the Plans for the year, or period, ended December 31, 2002 and Appendix J for an estimate by category of the allocation of actual fees paid by each class of shares of each Fund pursuant to its respective distribution plan for the year or period ended December 31, 2002.
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 (the "Rule 12b-1 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 the Funds and its respective shareholders.
The anticipated benefits that may result from the Plans with respect to each Fund and/or the classes of each Fund and its shareholders include but are not limited to the following: (1) rapid account access; (2) relatively predictable flow of cash; and (3) a well-developed, dependable network of shareholder service agents to help to curb sharp fluctuations in rates of redemptions and sales, thereby reducing the chance that an unanticipated increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans continue from year to year as long as such continuance is specifically approved, in person, at least annually by the Board of Trustees, including a majority of the Rule 12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of a majority of the Rule 12b-1 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, the Plans may be amended by the trustees, including a majority of the Rule 12b-1 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 Independent Trustees is committed to the discretion of the Independent Trustees.
The Class B Plan obligates 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 or its predecessors, unless there has been a complete termination of the Class B Plan (as defined in such Plan) and the Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through other broker-dealers with whom
AIM Distributors has entered into selected dealer agreements. 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, Class C and Class R shares of the Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. In the future, if multiple distributors serve a Fund, each such distributor (or its assignee or transferee) would receive a share of the payments under the Class B Plan based on the portion of the Fund's Class B shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds at the time of such sales. Payments with respect to Class C shares will equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution, and will consist of a sales commission of 0.75% of the purchase price of the Class C shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. AIM Distributors will retain all payments received by it relating to Class C shares for the first year after they are purchased. The portion of the payments to AIM Distributors under the Class A, Class C and Class R 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 the sales commissions to dealers plus financing costs, if any. After the first full year, AIM Distributors will make quarterly payments 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 payments will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.
AIM Distributors may pay dealers and institutions who sell Class R shares an annual fee of 0.50% of average daily net assets. These payments will consist of an asset-based fee of 0.25% and a service fee of 0.25% and will commence either on the thirteenth month after the first purchase, on accounts on which a dealer concession was paid, or immediately, on accounts on which a dealer concession was not paid. If AIM Distributors pays a dealer concession, it will retain all payments received by it relating to Class R shares for the first year after they are purchased. AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class R 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 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 or its predecessors; 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 for Class B shares would not affect the obligation of Class B shareholders to pay contingent deferred sales charges.
Total sales charges (front end and contingent deferred sales charges) paid in connection with the sale of shares of each class of each Fund, if applicable, for the last three fiscal years ending December 31 are found in Appendix K.
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as
follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the one, five or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the one, five or ten year
periods (or fractional portion of such period).
|
The average annual total returns for each Fund, with respect to its Class A, Class B, Class C and Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix L.
Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period.
Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return. Standardized total return for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value.
A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula:
n P(1+U) = ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
|
Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
|
The cumulative total returns for each Fund, with respect to its Class A, Class B, Class C and Class R, if applicable, shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix L.
Calculation of Certain Performance Data
AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund may use a restated or a blended performance calculation to derive certain performance data shown in this Statement of Additional Information and in the Funds' advertisements and other sales material. If the Funds' Class R shares were not offered to the public during the performance period covered, the performance data shown will be the restated historical performance of the Funds' Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If the Funds' Class R shares were offered to the public only during a portion of the performance period covered, the performance data shown will be the blended returns of the historical performance of the Funds' Class R shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If the Funds' Class R shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Funds' Class R shares.
A restated or blended performance calculation may be used to derive (i)
the Funds' standardized average annual total returns over a stated period and
(ii) the Funds' non-standardized cumulative total returns over a stated period.
Average Annual Total Return (After Taxes on Distributions) Quotation
A Fund's average annual total return (after taxes on distributions) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on distributions, but not on redemption proceeds. Average annual total returns (after taxes on distributions) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate
the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions) is:
n P(1+T) = ATV
D
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment
D made at the beginning of the one, five or ten year
periods (or since inception, if applicable) at the
end of the one, five or ten year periods (or since
inception, if applicable), after taxes on fund
distributions but not after taxes on redemption.
|
Standardized average annual total return (after taxes on distributions) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; (2) Class B and Class C shares reflect the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Class A, Class B and Class C shares for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix L.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n P(1+T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the one, five or ten year periods
(or since inception, if applicable) at the end of the
one, five or ten year periods (or since inception, if
applicable), after taxes on fund distributions and
redemption.
|
Standardized average annual total return (after taxes on distributions and redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; and (2) Class B and Class C shares reflect the deduction of the maximum applicable CDSC on a redemption of shares held for the period; and (3) Class R shares does not reflect a deduction of any sales charge since that class is generally sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Class A, Class B and Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix L.
Performance Information
All advertisements of the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge
would reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
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. 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.
Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities:
Advertising Age Forbes Nation's Business Barron's Fortune New York Times Best's Review Hartford Courant Pension World Broker World Inc. Pensions & Investments Business Week Institutional Investor Personal Investor Changing Times Insurance Forum Philadelphia Inquirer Christian Science Monitor Insurance Week USA Today Consumer Reports Investor's Business Daily U.S. News & World Report Economist Journal of the American Wall Street Journal FACS of the Week Society of CLU & ChFC Washington Post Financial Planning Kiplinger Letter CNN Financial Product News Money CNBC Financial Services Week Mutual Fund Forecaster PBS Financial World |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Stanger Donoghue's Weisenberger Mutual Fund Values (Morningstar) Lipper, Inc. |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Large-Cap Value Fund Index Lipper Multi-Cap Value Fund Index Lipper Mid-Cap Core Fund Index Lipper Small-Cap Growth Fund Index Russell 1000--Registered Trademark-- Index Russell 1000--Registered Trademark-- Value Index Russell 2000--Registered Trademark-- Growth Index Russell 2000--Registered Trademark-- Index Russell Midcap--Registered Trademark-- Index Standard & Poor's 500 Stock Index |
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those
Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds 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. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment 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; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds 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 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 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 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 rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds 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 represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Bonds in the Aa group which Moody's believes possess the strongest investment attributes are designated by the symbol Aa1.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to B. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category.
MOODY'S DUAL RATINGS
In the case of securities with a demand feature, two ratings are assigned: one representing an evaluation of the degree of risk associated with scheduled principal and interest payments, and the other representing an evaluation of the degree of risk associated with the demand feature.
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be designated Moody's Investment Grade or (MIG). Such ratings recognize the differences between short-term credit risk and long-term risk. Factors affecting the liquidity of the borrower and short-term cyclical elements are critical in short-term ratings, while other factors of major importance in bond risk, long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand feature variable rate demand obligation (VRDO). Such ratings will be designated as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on issues with demand features are differentiated by the use of the VMIG symbol to reflect such characteristics as payment upon periodic demand rather than fixed maturity dates and payment relying on external liquidity. Additionally, investors should be alert to the fact that the source of payment may be limited to the external liquidity with no or limited legal recourse to the issuer in the event the demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such programs are characterized as having variable short-term maturities but having neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and
ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effects of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
Note: A Moody's commercial paper rating may also be assigned as an evaluation of the demand feature of a short-term or long-term security with a put option.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a 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-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the lowest degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or large exposure to adverse conditions.
S&P MUNICIPAL BOND RATINGS
An S&P municipal bond rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The ratings are based, in varying degrees, on the following considerations: likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection
afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
Note: Ratings within the AA and A major rating categories may be modified by the addition of a plus (+) sign or minus (-) sign to show relative standing.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely the issue will be treated as a note); and source of payment (the more the issue depends on the market for its refinancing, the more likely it is to be treated as a note).
Note rating symbols and definitions are as follows:
SP-1: Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B: Issues with this rating are regarded as having only speculative capacity for timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless it is believed that such payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an occurrence that is likely to result in a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may be raised or lowered. FitchAlert is relatively short-term, and should be resolved within 12 months.
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating change over the intermediate term. It is described as "Positive" or "Negative." The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings ("BB" to "C") represent Fitch's assessment of the likelihood of timely payment of principal and interest in accordance with the terms of obligation for bond issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an assessment of the ultimate recovery value through reorganization of liquidation.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer or possible recovery value in bankruptcy, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily identical credit quality since rating categories cannot fully reflect the differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit issued by a commercial bank.
APPENDIX B
TRUSTEES AND OFFICERS
As of January 1, 2003
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 89 portfolios in the AIM Funds complex. Column two below includes length of time served with predecessor entities, if any.
----------------------------------------------------------------------------------------------------------------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
TRUST OFFICER HELD BY TRUSTEE
SINCE
----------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSONS
----------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1)-- 1946 1998 Director and Chairman, A I M Management Group None
Trustee, Chairman and Inc. (financial services holding company); and
President Director and Vice Chairman, AMVESCAP PLC (parent
of AIM and a global investment management firm)
Formerly: President and Chief Executive Officer,
A I M Management Group Inc.; Director, Chairman
and President, A I M Advisors, Inc. (registered
investment advisor); and Director and Chairman,
A I M Capital Management, Inc. (registered
investment advisor), A I M Distributors, Inc.
(registered broker dealer), A I M Fund Services,
Inc., (registered transfer agent), and Fund
Management Company (registered broker dealer)
----------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2)-- 1951 2003 Director, President and Chief Executive Officer, Director, Chairman,
Trustee and Executive Vice A I M Management Group Inc. (financial services President and Chief
President holding company); Director, Chairman and Executive Officer,
President, A I M Advisors, Inc. (registered INVESCO Bond Funds,
investment advisor); Director, A I M Capital Inc., INVESCO
Management, Inc. (registered investment advisor) Combination Stock &
and A I M Distributors, Inc. (registered broker Bond Funds, Inc.,
dealer), Director and Chairman, A I M Fund INVESCO Counselor
Services, Inc. (registered transfer agent), and Series Funds, Inc.,
Fund Management Company (registered broker INVESCO Global and
dealer); and Chief Executive Officer, AMVESCAP International
PLC - AIM Division (parent of AIM and a global Funds, Inc.,
investment management firm) INVESCO Manager
Series Funds, Inc.,
Formerly: Director, Chairman and Chief Executive INVESCO Money
Officer, INVESCO Funds Group, Inc.; and Chief Market Funds, Inc.,
Executive Officer, AMVESCAP PLC - Managed INVESCO Sector
Products Funds, Inc.,
INVESCO Stock
Funds, Inc.,
INVESCO Treasurer's
Series Funds, Inc.
and INVESCO
Variable Investment
Funds,
----------------------------------------------------------------------------------------------------------------------------
|
(1) Mr. Graham is considered an interested person of the Truust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003.
-------------------------------------------------------------------------------------------------------------------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
TRUST OFFICER HELD BY TRUSTEE
SINCE
-------------------------------------------------------------------------------------------------------------------------------
Inc.
-------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
-------------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1998 Of Counsel, law firm of Baker & McKenzie Badgley Funds, Inc.
Trustee (registered investment
company)
-------------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited
Trustee (technology consulting company) (insurance
company); and
Captaris, Inc.
(unified messaging
provider)
-------------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director, Magellan Insurance Company; Member Cortland Trust, Inc.
Trustee of Advisory Board of Rotary Power International (registered
(designer, manufacturer, and seller of rotary investment company)
power engines); and Director, The Boss Group
(private equity group)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo; and
director of various affiliated Volvo companies
-------------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 2001 Formerly: Chairman, Mercantile Mortgage Corp.; None
Trustee President and Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares Corp.
-------------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Century Administaff
Trustee Group, Inc. (government affairs company) and
Texana Timber LP
-------------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Trustee Frankel LLP Inc. (registered
investment company)
-------------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the None
Trustee USA
-------------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
-------------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1998 Retired None
Trustee
-------------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 2001 Executive Vice President, Hines (real estate None
Trustee development company)
-------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
----------------------------------------------------------------------------------------------------------------------------
Gary T. Crum(3) -- 1947 1998 Director, Chairman and Director of Investments, N/A
Senior Vice President A I M Capital Management, Inc.; Director and
Executive Vice President, A I M Management Group
Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors,
Inc. and AMVESCAP PLC
Formerly: Chief Executive Officer and
-------------------------------------------------------------------------------------------------------------------------------
|
(3) Information is current as of January 10, 2003.
--------------------------------------------------------------------------------------------------------------------------
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE AND/OR DIRECTORSHIP(S)
TRUST OFFICER HELD BY TRUSTEE
SINCE
--------------------------------------------------------------------------------------------------------------------------
President, A I M Capital Management, Inc.
--------------------------------------------------------------------------------------------------------------------------
Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer - N/A
Vice President Fixed Income, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
--------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1998 Vice President and Chief Compliance Officer, N/A
Vice President A I M Advisors, Inc. and A I M Capital
Management, Inc.; and Vice President, A I M Fund
Services, Inc.
--------------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen(3) -- 1940 2002 Vice President, A I M Advisors, Inc.; and N/A
Vice President President, Chief Executive Officer and Chief
Investment Officer, A I M Capital Management, Inc.
-------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1998 Vice President and Fund Treasurer, N/A
Vice President and A I M Advisors, Inc.
Treasurer
--------------------------------------------------------------------------------------------------------------------------
Nancy L. Martin(4) -- 1957 2003 Vice President, A I M Advisors, Inc.; and Vice N/A
Secretary President and General Counsel, A I M Capital
Management, Inc.
--------------------------------------------------------------------------------------------------------------------------
|
(3) Information is current of the January 10, 2003.
(4) Ms. Martin became Secretary of the Trust on April 1, 2003.
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2002
--------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
DOLLAR RANGE OF EQUITY SECURITIES INVESTMENT COMPANIES OVERSEEN BY
NAME OF TRUSTEE PER FUND TRUSTEE IN THE AIM FAMILY OF FUNDS(R)
--------------------------------------------------------------------------------------------------------------------
Robert H. Graham Basic Value Over $100,000 Over $100,000
Mid Cap Core Equity Over $100,000
Small Cap Growth Over $100,000
--------------------------------------------------------------------------------------------------------------------
Mark H. Williamson -0- $ 10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -0- $ 10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -0- $ 1 - $10,000
--------------------------------------------------------------------------------------------------------------------
Albert R. Dowden Basic Value $1 - $10,000 $50,001 - $100,000
Mid Cap Core Equity $1 - $10,000
--------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. Basic Value $ 1 - $10,000 Over $100,000(5)
Mid Cap Core Equity $ 1 - $10,000
--------------------------------------------------------------------------------------------------------------------
Jack M. Fields -0- Over $100,000(5)
--------------------------------------------------------------------------------------------------------------------
Carl Frischling Basic Value Over $100,000 Over $100,000(5)
Mid Cap Core Equity Over $100,000
--------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -0- Over $100,000(5)
--------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock Mid Cap Core Equity $ 1 - $10,000 $50,000 - $100,000
--------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -0- $ 1 -$10,000
--------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -0- Over $100,000(5)
--------------------------------------------------------------------------------------------------------------------
|
(5) Includes the total amount of compensation deferred by the trustee at his or her election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the AIM Funds.
APPENDIX C
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002:
-------------------------------------------------------------------------------------------------------------
RETIREMENT
AGGREGATE BENEFITS ESTIMATED TOTAL
COMPENSATION FROM ACCRUED ANNUAL COMPENSATION
THE BY ALL BENEFITS UPON FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
-------------------------------------------------------------------------------------------------------------
Frank S. Bayley $6,889 $142,800 $90,000 $150,000
-------------------------------------------------------------------------------------------------------------
Bruce L. Crockett 6,845 $ 50,132 90,000 149,000
-------------------------------------------------------------------------------------------------------------
Albert R. Dowden 8,889 57,955 90,000 150,000
-------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 6,845 94,149 90,000 149,000
-------------------------------------------------------------------------------------------------------------
Jack M. Fields 6,889 29,153 90,000 153,000
-------------------------------------------------------------------------------------------------------------
Carl Frischling(5) 6,889 74,511 90,000 150,000
-------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 6,889 33,931 90,000 150,000
-------------------------------------------------------------------------------------------------------------
Lewis F. Pennock 7,052 54,802 90,000 154,000
-------------------------------------------------------------------------------------------------------------
Ruth H. Quigley 6,889 142,502 90,000 153,000
-------------------------------------------------------------------------------------------------------------
Louis S. Sklar 7,008 78,500 90,000 153,000
-------------------------------------------------------------------------------------------------------------
|
(1) The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended December 31, 2002, including earnings, was $29,385.
(2) During the fiscal year ended December 31, 2002, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $44,552.
(3) Amounts shown assume each trustee serves until his or her normal retirement date.
(4) All trustees currently serve as directors or trustees of seventeen registered investment companies advised by AIM.
(5) During the fiscal year ended December 31, 2002, the Trust paid $19,860 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm.
APPENDIX D
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of April 4, 2003.
AIM BASIC VALUE FUND
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Branch Banking & Trust TTEE
FBO W E Stanley & Co INC
OMNIBUS Daily Trading -- -- -- 15.16% --
300 E. Wendover Ave.
Greensboro, NC 27401-1229
--------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc.
Reinvestment Account 5.46% -- -- -- --
101 Montgomery St.
San Francisco, CA 94104-0000
--------------------------------------------------------------------------------------------------------------------
First Command Bank Trust
Attn: Trust Department -- -- -- -- 15.15%
P.O. Box 901075
Fort Worth, TX 76101-2075
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
The Guardian Insurance
& Annuity Company Inc.
Separate Acct L -- -- -- 9.29% --
Attn: Equity Acctg 3518
3900 Burgess Place
Bethlehem, PA 18017-
9097
--------------------------------------------------------------------------------------------------------------------
Heritage Registration
Company
1900 NW Expressway -- -- -- -- 84.34%
50 Penn Place Suite
R225
Oklahoma City, OK
73118-1802
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers 7.05% 10.69% 20.26% -- --
Attn: Fund
Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO French Paper
Company Employees -- -- -- 10.62% --
Savings & Investment
Plan
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Reliance Trust
Company Custodian
FBO The Office of the
Chapter 13 Trustee 401K -- -- -- 10.42% --
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Mecklenburg
Neurological Associates
PA 401K Plan -- -- -- 5.86% --
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Synergex 401K
Plan -- -- -- 7.07% --
3300 Northeast
Expressway Suite 200
Atlanta, GA 30341-3941
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO William J. Kamm
and Sons -- -- -- 11.56% --
Inc 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Smith Barney House Account
Attn: Cindy Tempesta
333 West 34th Street -- 9.84% 5.69% -- --
7th Floor
New York, NY 10001-
2402
--------------------------------------------------------------------------------------------------------------------
|
AIM MID CAP CORE EQUITY FUND
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Capital Bank & Trust Co.
TTEE
FBO Reeves Brothers
Inc 401(k) Plan
C/O Plan -- -- -- 5.07% --
Premier/Fascorp
8515 E. Orchard Rd 2T2
Englewood, CO 80111-
5037
--------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co.
Inc.
Reinvestment Account 5.10% -- -- -- --
1001 Montgomery Street
San Francisco, CA
94104-0000
--------------------------------------------------------------------------------------------------------------------
Compass Bancshares
Inc
Employee Stock
Ownership Plan
Nationwide Trust Co.
TTEE -- -- -- -- 15.76%
FBO Compass
Bancshares Inc.
P.O. Box 1412
Austin, TX 78767-1412
--------------------------------------------------------------------------------------------------------------------
Counsel Trust Co.
FBO American Bulk
Commodities Retirement
Savings Plan -- -- -- 7.30% --
235 St. Charles Way
Suite 100
York, PA 17402-4643
--------------------------------------------------------------------------------------------------------------------
Frontier Trust Company
401K
FBO Ted Britt Ford 401K -- -- -- 5.01% --
P.O. Box 10699
Fargo, ND 58106-0699
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
The Guardian Insurance &
Annuity Company Inc.
Separate Acct L -- -- -- 20.01% --
Attn: Equity Acctg 3518
3900 Burgess Place
Bethlehem, PA 18017-9097
--------------------------------------------------------------------------------------------------------------------
Heritage Registration Company
1900 NW Expressway -- -- -- -- 12.08%
Suite R225
Oklahoma City, OK 73118-1817
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 8.51% 7.18% 20.36% -- --
4800 Deer Lake Dr East, 2nd
Floor
Jacksonville, FL 32246
--------------------------------------------------------------------------------------------------------------------
The Northern Trust Co.
FBO Northern Trust Tip-DV -- -- -- -- 58.48%
P.O. Box 92956
Chicago, IL 60675
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Olson International Ltd -- -- -- 9.13% --
401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Smith Barney
House Account
Attn: Cindy Tempesta -- -- 5.64% -- --
333 West 34th Street
7th Floor
NY, NY 10001-2402
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Stanton Trust Company NA as
Trustee for the W.L. Hall
Company
401K and Profit Sharing Plan -- -- -- 8.04% --
3405 Annapolia Lane N.
Suite 100
Minneapolis, MN 55447-8769
--------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank MN NA
FBO Pinnacle West Capital EE
Svgs 13508112 -- -- -- -- 9.18%
P.O. Box 1533
Minneapolis, MN 55480-1533
--------------------------------------------------------------------------------------------------------------------
|
AIM SMALL CAP GROWTH FUND
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Branch Banking & Trust TTEE
FBO W.E. Stanley & Co. Inc.
Omnibus Daily Trading -- -- -- 42.84% --
300 E. Wendover Ave.
Greensboro, NC 27401-1229
--------------------------------------------------------------------------------------------------------------------
The Bretzlaff Foundation Inc.
Attn: Michael J. Melarkey
165 W. Liberty St. -- -- -- -- 7.83%
Suite 210
Reno, NV 89501-2902
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Counsel Trust Co.
FBO American Bulk Commodities
Retirement Savings Plan -- -- -- 9.35% --
235 St. Charles Way
Suite 100
York, PA 17402-4643
--------------------------------------------------------------------------------------------------------------------
Equator Technologies, Inc.
401(k) Retirement Plan -- -- -- 12.95% --
12 West Boylstown Street
West Boylstown, MA 01583-1710
--------------------------------------------------------------------------------------------------------------------
Hubco
Regions Financial Corp -- -- -- -- 17.15%
P.O. Box 830688
Birmingham, AL 35283-0688
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner &
Smith
FBO The Sole Benefit of
Customers
Attn: Fund Administration 12.67% 9.84% 17.54% -- --
4800 Deer Lake Dr East, 2nd
Floor
Jacksonville, FL 32246
--------------------------------------------------------------------------------------------------------------------
New York Life Trust Company
401(k) Clients Accounts
51 Madison Avenue, Room 117A 6.00% -- -- -- --
New York, NY 10010-0000
--------------------------------------------------------------------------------------------------------------------
|
--------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
--------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust Co. TTEE
RAB Holdings Inc Retirement
Savings Plan
One Investors Way -- -- -- -- 44.56%
Attn: DC Plan Admin Team
(MS:N1D) (650030)
Norwood, MA 02062-1584
--------------------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust Co. TTEE
FBO Idaho Power Company
Employee Savings Plan
Attn: DCPA Team 650562 MS -- -- -- -- 25.53%
N-3-6
One Investors Way
Norwood, MA 02062-1584
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Burgmann Seals America -- -- -- 8.27% --
401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Mecklenburg Neurological -- -- -- 5.53% --
Associates PA 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529
--------------------------------------------------------------------------------------------------------------------
Smith Barney
House Account
Attn: Cindy Tempesta -- -- 5.07% -- --
333 West 34th Street
7th Floor
NY, NY 10001-2402
--------------------------------------------------------------------------------------------------------------------
|
MANAGEMENT OWNERSHIP
As of April 4, 2003, the trustees and officers as a group owned less than 1% of the shares outstanding of each class of any Fund.
APPENDIX E
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2002 2001
-----------------------------------------------------------------------------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
-----------------------------------------------------------------------------------------------------------
AIM Basic
Value Fund $31,679,859 $ 39,803 $ 31,640,056 $16,948,293 $ 13,380 $16,934,913
-----------------------------------------------------------------------------------------------------------
AIM Mid Cap
Core Equity
Fund $ 9,735,227 $ 42,589 $ 9,692,638 $ 4,690,551 $ 8,143 $ 4,682,408
-----------------------------------------------------------------------------------------------------------
AIM Small Cap
Growth Fund $ 7,192,423 $ 23,725 $ 7,168,698 $ 5,262,338 $ 4,597 $ 5,257,741
-----------------------------------------------------------------------------------------------------------
|
FUND NAME 2000
--------------------------------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID
--------------------------------------------------------------
AIM Basic
Value Fund $ 2,733,163 $ 5,258 $ 2,727,905
--------------------------------------------------------------
AIM Mid Cap
Core Equity
Fund $ 2,947,272 0 $ 2,947,272
--------------------------------------------------------------
AIM Small Cap
Growth Fund $ 6,615,573 $ 2,913 $ 6,612,660
--------------------------------------------------------------
|
APPENDIX F
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended December 31:
----------------------------------------------------------------------------
FUND NAME 2002 2001 2000
----------------------------------------------------------------------------
AIM Basic Value Fund $ 486,863 $ 279,428 $ 95,398
----------------------------------------------------------------------------
AIM Mid Cap Core
Equity Fund $ 274,931 $ 133,274 $101,673
----------------------------------------------------------------------------
AIM Small Cap Growth
Fund $ 206,896 $ 134,512 $132,817
----------------------------------------------------------------------------
|
APPENDIX G
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended December 31 were as follows:
FUND 2002 2001(2) 2000
---- ---- -------- ----
AIM Basic Value Fund(3) $ 7,413,401 $ 7,503,643 $ 1,312,544
AIM Mid Cap Core Equity Fund(4) 2,957,059 1,571,624 704,102
AIM Small Cap Growth Fund(5) 1,470,812 567,827 563,807
|
(1) Disclosure regarding brokerage commissions is limited to commissions paid on agency trades and designated as such on the trade confirm.
(2) Prior to June 6, 2000 for AIM Basic Value Fund and prior to September 11, 2000 for AIM Small Cap Growth Fund, the brokerage fees were paid by each fund's respective hub portfolio.
(3) The variation in brokerage commissions paid by AIM Basic Value Fund for the fiscal years ended December 31, 2002 and 2001, as compared to the fiscal year ended December 31, 2000, was due to a significant increase in asset levels that led to additional buying and selling of stocks.
(4) The variation in brokerage commission paid by AIM Mid Cap Core Equity Fund for the fiscal year ended December 31, 2002, as compared to the two prior fiscal years, was due to a significant increase in asset levels that led to additional buying and selling of stocks.
(5) The variation in brokerage commission paid by AIM Small Cap Growth Fund for the fiscal year ended December 31, 2002, as compared to the two prior fiscal years, was due to a significant increase in asset levels that led to additional buying and selling of stocks.
APPENDIX H
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2002, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions Brokerage Commissions
---- ------------ ---------------------
AIM Basic Value Fund $ 554,597,359 $ 986,632
AIM Mid Cap Core Equity Fund 160,422,735 317,547
AIM Small Cap Growth Fund 83,244,535 187,981
|
During the last fiscal year ended December 31, 2002, AIM Basic Value Fund held securities issued by the following companies, which are "regular" brokers or dealers of the Fund:
Issuer Security Market Value ----------------------------------------------------------------- J. P. Morgan Chase & Co. Common Stock $ 113,184,000 Merrill Lynch & Co., Inc. Common Stock 109,371,900 Morgan Stanley Common Stock 98,602,400 |
APPENDIX I
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plans for the fiscal year ended December 31, 2002 follows:
CLASS A CLASS B CLASS C CLASS R
FUND SHARES SHARES SHARES SHARES(1)
---- ------ ------ ------ -------
AIM Basic Value Fund $ 8,779,210 $ 16,608,838 $ 5,884,893 $ 1,647
AIM Mid Cap Core Equity Fund 2,838,084 4,506,502 1,224,586 2,428
AIM Small Cap Growth Fund 2,059,361 1,944,775 516,983 1,176
|
(1) Information on Class R shares in the table is for the period June 3, 2002 (the date Class R shares commenced operations) to December 31, 2002.
APPENDIX J
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class A shares of the Funds during the fiscal year ended December 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ------- -------- ------------ ------------
AIM Basic Value Fund $ 691.647 $ 90,429 $ 265,443 -0- $ 7,731,691
AIM Mid Cap Core Equity Fund 162,345 21,563 58,378 -0- 2,595,797
AIM Small Cap Growth Fund 25,280 3,311 9,798 -0- 2,020,972
|
An estimate by category of the allocation of actual fees paid by Class B shares of the Funds during the fiscal year ended December 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- -------- -------- ------------ ------------
AIM Basic Value Fund $ 608,161 $ 78,674 $ 239,825 $ 12,456,628 $ 3,225,550
AIM Mid Cap Core Equity Fund 164,059 21,590 60,493 3,379,876 880,484
AIM Small Cap Growth Fund 51,881 6,517 22,191 1,458,581 405,605
|
An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the fiscal year ended December 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- -------- -------- ------------ ------------
AIM Basic Value Fund $ 251,541 $32,444 $ 99,849 $ 1,766,158 $ 3,734,901
AIM Mid Cap Core Equity Fund 79,567 10,441 28,002 543,050 563,526
AIM Small Cap Growth Fund 27,545 3,586 11,207 197,997 276,648
|
An estimate by category of the allocation of actual fees paid by Class R1 shares of the Funds during the fiscal year ended December 31, 2002 follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- -------- -------- ------------ ------------
AIM Basic Value Fund $ 327 $ 46 $ 116 $ 752 $ 406
AIM Mid Cap Core Equity Fund 435 66 107 963 857
AIM Small Cap Growth Fund 247 38 49 535 307
|
(1) Information on Class R shares in the table is for the period June 3, 2002 (the date Class R shares commenced operations) to December 31, 2002.
APPENDIX K
TOTAL SALES CHARGES
The following chart reflects the total sales charges paid in connection with the sale of Class A shares of each Fund and the amount retained by AIM Distributors for the last three fiscal years ending December 31:
2002 2001 2000
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
AIM Basic Value Fund $ 9,981,981 $1,521,182 $14,544,555 $ 2,184,609 $ 2,328,332 $ 369,761
AIM Mid Cap Core Equity Fund 5,400,197 804,255 2,865,187 431,519 1,083,635 177,606
AIM Small Cap Growth Fund 1,310,416 198,431 940,378 132,238 803,007 137,909
|
The following chart reflects the contingent deferred sales charges paid by Class A, Class B, Class C and Class R shareholders and retained by AIM Distributors for the last three fiscal years ended December 31:
2002 2001 2000
---- ---- ----
AIM Basic Value Fund $ 235,808 $ 171,073 $ 36,098
AIM Mid Cap Core Equity Fund 72,938 29,528 4,238
AIM Small Cap Growth Fund 53,881 44,797 12,529
|
APPENDIX L
PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns (including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ----
AIM Basic Value Fund -27.37% 4.33% - 10.25% 10/18/95
AIM Mid Cap Core Equity Fund -15.99% 5.57% 10.32% - 06/09/87
AIM Small Cap Growth Fund -31.96% 6.45% - 9.04% 10/18/95
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ----
AIM Basic Value Fund -27.45% 4.49% 10.41% 10/18/95
AIM Mid Cap Core Equity Fund -16.10% 5.75% 11.49% 04/01/93
AIM Small Cap Growth Fund -32.15% 6.57% 9.14% 10/18/95
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
INCEPTION
CLASS C SHARES: 1 YEAR SINCE INCEPTION DATE
-------------- ------ --------------- ----
AIM Basic Value Fund -24.39% 0.13% 05/03/99
AIM Mid Cap Core Equity Fund -12.58% 8.60% 05/03/99
AIM Small Cap Growth Fund -29.28% -0.08% 05/03/99
|
The average annual total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002*
------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------- ------ ------- -------- --------- ------
AIM Basic Value Fund -23.25% 5.35% - 10.96% 10/18/95
AIM Mid Cap Core Equity -11.14% 6.63% 10.79% - 06/09/87
Fund
AIM Small Cap Growth Fund -28.21% 7.47% - 9.73% 10/18/95
|
* The returns shown for these periods are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2002 and the restated historical performance of the Funds' Class A shares (for periods prior to June 3, 2002) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R. shares.
** The inception date shown in the table is that of the Funds' Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
CUMULATIVE TOTAL RETURNS
The cumulative total returns (including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ----
AIM Basic Value Fund -27.37% 23.60% - 101.99% 10/18/95
AIM Mid Cap Core Equity Fund -15.99% 31.14% 167.07% - 06/09/87
AIM Small Cap Growth Fund -31.96% 36.69% - 86.57% 10/18/95
|
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ----
AIM Basic Value Fund -27.45% 24.56% 104.12% 10/18/95
AIM Mid Cap Core Equity Fund -16.10% 32.23% 188.67% 04/01/93
AIM Small Cap Growth Fund -32.15% 37.45% 87.76% 10/18/95
|
The cumulative total returns (including maximum applicable contingent deferred sales charge ) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR INCEPTION DATE
-------------- ------ --------- ----
AIM Basic Value Fund -24.39% 0.49% 05/03/99
AIM Mid Cap Core Equity Fund -12.58% 35.30% 05/03/99
AIM Small Cap Growth Fund -29.28% -0.29% 05/03/99
|
The cumulative total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002*
------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE**
-------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -23.25% 29.79% - 111.53% 10/18/95
AIM Mid Cap Core Equity Fund -11.14% 37.84% 178.70% - 0609/87
AIM Small Cap Growth Fund -28.21% 43.37% - 95.14% 10/18/95
|
* The returns shown for these periods are the blended returns of the historical performance of the Funds' Class R shares since June 3, 2002 and the restated historical performance of the Funds' Class A shares (for periods prior to June 3, 2002) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R. shares.
** The inception date shown in the table is that of the Funds' Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions and including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ----
AIM Basic Value Fund -27.37% 4.11% - 9.62% 10/18/95
AIM Mid Cap Core Equity Fund -16.00% 3.46% 7.34% - 06/09/87
AIM Small Cap Growth Fund -31.96% 5.65% - 7.95% 10/18/95
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ----
AIM Basic Value Fund -27.45% 4.27% 9.79% 10/18/95
AIM Mid Cap Core Equity Fund -16.12% 3.48% 8.32% 04/01/93
AIM Small Cap Growth Fund -32.15% 5.73% 8.02% 10/18/95
|
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR INCEPTION DATE
-------------- ------ --------- ----
AIM Basic Value Fund -24.39% 0.01% 05/03/99
AIM Mid Cap Core Equity Fund -12.60% 6.05% 05/03/99
AIM Small Cap Growth Fund -29.28% -0.81% 05/03/99
|
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption and including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less that ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
-------------- ------ ------- -------- --------- ----
AIM Basic Value Fund -16.81% 3.42% - 8.27% 10/18/95
AIM Mid Cap Core Equity Fund -9.80% 3.65% 7.11% - 06/09/87
AIM Small Cap Growth Fund -19.62% 5.04% - 7.05% 10/18/95
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS INCEPTION DATE
-------------- ------ ------- --------- ----
AIM Basic Value Fund -16.85% 3.56% 8.42% 10/18/95
AIM Mid Cap Core Equity Fund -9.86% 3.75% 8.07% 04/01/93
AIM Small Cap Growth Fund -19.74% 5.13% 7.14% 10/18/95
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR INCEPTION DATE
-------------- ------ --------- ----
AIM Basic Value Fund -14.98% 0.06% 05/03/99
AIM Mid Cap Core Equity Fund -7.70% 6.04% 05/03/99
AIM Small Cap Growth Fund -17.98% -0.18% 05/03/99
|
FINANCIAL STATEMENTS
FS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Basic Value Fund:
In our opinion, the accompanying statement of assets and liabilities, schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Basic Value Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
===========================================================================
DOMESTIC COMMON STOCKS-85.34%
ADVERTISING-5.07%
Interpublic Group of Cos., Inc. (The) 6,922,700 $ 97,471,616
---------------------------------------------------------------------------
Omnicom Group Inc. 2,065,000 133,399,000
===========================================================================
230,870,616
===========================================================================
AEROSPACE & DEFENSE-1.07%
Honeywell International Inc. 2,025,000 48,600,000
===========================================================================
APPAREL RETAIL-3.09%
Gap, Inc. (The) 9,057,300 140,569,296
===========================================================================
BANKS-6.35%
Bank of America Corp. 1,476,799 102,740,906
---------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 3,910,000 93,683,600
---------------------------------------------------------------------------
Bank One Corp. 2,543,000 92,946,650
===========================================================================
289,371,156
===========================================================================
BUILDING PRODUCTS-4.17%
American Standard Cos. Inc.(a) 1,399,000 99,524,860
---------------------------------------------------------------------------
Masco Corp. 4,292,600 90,359,230
===========================================================================
189,884,090
===========================================================================
DATA PROCESSING SERVICES-4.43%
Ceridian Corp.(a) 5,946,300 85,745,646
---------------------------------------------------------------------------
First Data Corp. 3,276,000 116,003,160
===========================================================================
201,748,806
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.87%
Cendant Corp.(a) 4,745,000 49,727,600
---------------------------------------------------------------------------
H&R Block, Inc. 3,145,400 126,445,080
===========================================================================
176,172,680
===========================================================================
DIVERSIFIED FINANCIAL SERVICES-13.74%
Citigroup Inc. 3,444,597 121,215,368
---------------------------------------------------------------------------
Freddie Mac 2,100,400 124,028,620
---------------------------------------------------------------------------
J.P. Morgan Chase & Co. 4,716,000 113,184,000
---------------------------------------------------------------------------
Janus Capital Group Inc. 4,544,000 59,390,080
---------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,882,000 109,371,900
---------------------------------------------------------------------------
Morgan Stanley 2,470,000 98,602,400
===========================================================================
625,792,368
===========================================================================
ELECTRIC UTILITIES-1.08%
PG&E Corp.(a) 3,554,000 49,400,600
===========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-2.23%
Waters Corp.(a) 4,670,000 101,712,600
===========================================================================
|
MARKET
SHARES VALUE
===========================================================================
EMPLOYMENT SERVICES-0.82%
Robert Half International Inc.(a) 2,310,300 $ 37,218,933
===========================================================================
ENVIRONMENTAL SERVICES-3.11%
Waste Management, Inc. 6,192,167 141,924,468
===========================================================================
FOOD RETAIL-3.58%
Kroger Co. (The)(a) 7,216,400 111,493,380
---------------------------------------------------------------------------
Safeway Inc.(a) 2,200,000 51,392,000
===========================================================================
162,885,380
===========================================================================
GENERAL MERCHANDISE STORES-1.80%
Target Corp. 2,740,600 82,218,000
===========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-3.56%
IMS Health Inc. 5,535,900 88,574,400
---------------------------------------------------------------------------
McKesson Corp. 2,721,900 73,572,957
===========================================================================
162,147,357
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.58%
Starwood Hotels & Resorts Worldwide, Inc. 3,024,000 71,789,760
===========================================================================
INDUSTRIAL MACHINERY-1.63%
Parker-Hannifin Corp. 1,607,600 74,158,588
===========================================================================
LEISURE PRODUCTS-1.55%
Mattel, Inc. 3,686,460 70,595,709
===========================================================================
LIFE & HEALTH INSURANCE-1.22%
UnumProvident Corp. 3,163,300 55,484,282
===========================================================================
MANAGED HEALTH CARE-1.52%
UnitedHealth Group Inc. 827,200 69,071,200
===========================================================================
MOVIES & ENTERTAINMENT-1.76%
Walt Disney Co. (The) 4,910,000 80,082,100
===========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.53%
Duke Energy Corp. 3,575,000 69,855,500
===========================================================================
OIL & GAS DRILLING-4.98%
ENSCO International Inc. 4,491,000 132,259,950
---------------------------------------------------------------------------
Transocean Inc. 4,076,698 94,579,394
===========================================================================
226,839,344
===========================================================================
PHARMACEUTICALS-2.08%
Wyeth 2,540,000 94,996,000
===========================================================================
|
FS-2
MARKET
SHARES VALUE
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.43%
MGIC Investment Corp. 1,114,100 $ 46,012,330
---------------------------------------------------------------------------
Radian Group Inc. 1,747,396 64,915,761
===========================================================================
110,928,091
===========================================================================
SEMICONDUCTOR EQUIPMENT-3.22%
Applied Materials, Inc.(a) 5,105,000 66,518,150
---------------------------------------------------------------------------
Novellus Systems, Inc.(a) 2,849,000 79,999,920
===========================================================================
146,518,070
===========================================================================
SYSTEMS SOFTWARE-2.81%
Computer Associates International, Inc. 9,484,900 128,046,150
===========================================================================
TELECOMMUNICATIONS EQUIPMENT-1.06%
Motorola, Inc. 5,570,000 48,180,500
===========================================================================
Total Domestic Common Stocks (Cost
$4,510,937,818) 3,887,061,644
===========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-11.71%
BERMUDA-8.31%
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 2,365,000 83,413,550
---------------------------------------------------------------------------
Tyco International Ltd. (Industrial
Conglomerates) 10,646,000 181,833,680
---------------------------------------------------------------------------
Weatherford International Ltd. (Oil & Gas
Equipment & Services)(a) 2,837,000 113,281,410
===========================================================================
378,528,640
===========================================================================
CAYMAN ISLANDS-2.37%
ACE Ltd. (Property & Casualty Insurance) 3,687,000 108,176,580
===========================================================================
|
MARKET
SHARES VALUE
===========================================================================
NETHERLANDS-1.03%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Consumer Electronics) 2,643,098 $ 46,729,973
===========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $707,004,899) 533,435,193
===========================================================================
MONEY MARKET FUNDS-3.94%
STIC Liquid Assets Portfolio(b) 89,779,169 89,779,169
---------------------------------------------------------------------------
STIC Prime Portfolio(b) 89,779,169 89,779,169
===========================================================================
Total Money Market Funds (Cost
$179,558,338) 179,558,338
===========================================================================
TOTAL INVESTMENTS-100.99% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$5,397,501,055) 4,600,055,175
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-5.08%
STIC Liquid Assets Portfolio(b)(c) 115,607,394 115,607,394
---------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 115,607,395 115,607,395
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $231,214,789) 231,214,789
===========================================================================
TOTAL INVESTMENTS-106.07% (Cost
$5,628,715,844) 4,831,269,964
===========================================================================
OTHER ASSETS LESS LIABILITIES-(6.07%) (276,340,698)
===========================================================================
NET ASSETS-100.00% $4,554,929,266
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$5,628,715,844)* $4,831,269,964
------------------------------------------------------------
Receivables for:
Investments sold 5,031,217
------------------------------------------------------------
Fund shares sold 19,848,562
------------------------------------------------------------
Dividends 6,793,524
------------------------------------------------------------
Investment for deferred compensation plan 23,645
------------------------------------------------------------
Other assets 153,084
============================================================
Total assets 4,863,119,996
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 50,761,427
------------------------------------------------------------
Fund shares reacquired 18,336,269
------------------------------------------------------------
Deferred compensation plan 23,645
------------------------------------------------------------
Collateral upon return of securities
loaned 231,214,789
------------------------------------------------------------
Accrued distribution fees 5,020,831
------------------------------------------------------------
Accrued transfer agent fees 2,287,253
------------------------------------------------------------
Accrued operating expenses 546,516
============================================================
Total liabilities 308,190,730
============================================================
Net assets applicable to shares
outstanding $4,554,929,266
____________________________________________________________
============================================================
NET ASSETS:
Class A $2,534,964,078
____________________________________________________________
============================================================
Class B $1,498,498,797
____________________________________________________________
============================================================
Class C $ 518,574,540
____________________________________________________________
============================================================
Class R $ 1,421,225
____________________________________________________________
============================================================
Institutional Class $ 1,470,626
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 115,987,981
____________________________________________________________
============================================================
Class B 71,668,879
____________________________________________________________
============================================================
Class C 24,804,890
____________________________________________________________
============================================================
Class R 65,077
____________________________________________________________
============================================================
Institutional Class 66,994
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.86
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.86 divided by
94.50%) $ 23.13
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 20.91
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 20.91
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.84
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 21.95
____________________________________________________________
============================================================
|
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax
of $199,616) $ 51,387,184
------------------------------------------------------------
Dividends from affiliated money market
funds 3,622,103
------------------------------------------------------------
Security lending income 271,120
============================================================
Total investment income 55,280,407
============================================================
EXPENSES:
Advisory fees 31,679,859
------------------------------------------------------------
Administrative services fees 486,863
------------------------------------------------------------
Custodian fees 329,909
------------------------------------------------------------
Distribution fees -- Class A 8,779,210
------------------------------------------------------------
Distribution fees -- Class B 16,608,838
------------------------------------------------------------
Distribution fees -- Class C 5,884,893
------------------------------------------------------------
Distribution fees -- Class R 1,647
------------------------------------------------------------
Transfer agent fees 12,513,944
------------------------------------------------------------
Transfer agent fees -- Institutional Class 333
------------------------------------------------------------
Trustees' fees 33,990
------------------------------------------------------------
Other 1,762,558
============================================================
Total expenses 78,082,044
============================================================
Less: Fees waived (39,803)
------------------------------------------------------------
Expenses paid indirectly (73,235)
============================================================
Net expenses 77,969,006
============================================================
Net investment income (loss) (22,688,599)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (224,532,143)
------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (1,119,642,589)
============================================================
Net gain (loss) from investment securities (1,344,174,732)
============================================================
Net increase (decrease) in net assets
resulting from operations $(1,366,863,331)
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $228,283,230 were on loan to brokers.
See Notes to Financial Statements.
FS-4
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,688,599) $ (9,594,809)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (224,532,143) (231,405,003)
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (1,119,642,589) 216,112,590
===============================================================================================
Net increase (decrease) in net assets resulting from
operations (1,366,863,331) (24,887,222)
===============================================================================================
Distributions to shareholders from net investment income:
Class A -- (114,095)
-----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (1,004,440)
-----------------------------------------------------------------------------------------------
Class B -- (778,204)
-----------------------------------------------------------------------------------------------
Class C -- (290,032)
-----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,177,106,683 1,619,680,325
-----------------------------------------------------------------------------------------------
Class B 447,671,199 1,315,483,690
-----------------------------------------------------------------------------------------------
Class C 122,712,958 379,676,399
-----------------------------------------------------------------------------------------------
Class R 1,424,141 --
-----------------------------------------------------------------------------------------------
Institutional Class 1,422,881 --
===============================================================================================
Net increase in net assets 383,474,531 3,287,766,421
===============================================================================================
NET ASSETS:
Beginning of year 4,171,454,735 883,688,314
===============================================================================================
End of year $ 4,554,929,266 $4,171,454,735
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,811,813,680 $4,084,121,184
-----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (65,471) (22,238)
-----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and option contracts (459,373,063) (234,840,920)
-----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (797,445,880) 322,196,709
===============================================================================================
$ 4,554,929,266 $4,171,454,735
_______________________________________________________________________________________________
===============================================================================================
|
See Notes to Financial Statements.
FS-5
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class 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 ("CDSC"). Under some circumstances, Class A and Class R shares are subject to CDSC charges. Class R shares and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. 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 long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
FS-6
E. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
F. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has agreed to waive advisory fees payable by the Fund to AIM at the annual rate of 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum waiver of 0.175% on net assets in excess of $35 billion. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $39,803.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $486,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $5,522,212 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $8,779,210, $16,608,838, $5,884,893 and $1,647, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $1,521,182 in front-end sales commissions from the sale of Class A shares and $36,121, $5,523, $194,164, and $0 for Class A, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $10,466 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $72,605 and reductions in custodian fees of $630 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $73,235.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the
FS-7
line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee is allocated among the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $228,283,230 were on loan to brokers. The loans were secured by cash collateral of $231,214,789 received by the Fund and subsequently invested in affiliated money market funds as follows: $115,607,394 in STIC Liquid Assets Portfolio and $115,607,395 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $271,120 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
---------------------------------------------------------------
Distributions paid from:
Ordinary income $ -- $1,140,758
---------------------------------------------------------------
Long-term capital gain -- 1,046,013
===============================================================
$ -- $2,186,771
_______________________________________________________________
===============================================================
|
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (808,908,153)
------------------------------------------------------------
Temporary book/tax differences (65,471)
------------------------------------------------------------
Capital loss carryforward (435,212,033)
------------------------------------------------------------
Post-October capital loss deferral (12,698,757)
------------------------------------------------------------
Shares of beneficial interest 5,811,813,680
============================================================
$4,554,929,266
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
-------------------------------------------------------
December 31, 2009 $101,680,239
-------------------------------------------------------
December 31, 2010 333,531,794
=======================================================
$435,212,033
_______________________________________________________
=======================================================
|
NOTE 8--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, 2002 was $3,143,527,166 and $1,381,420,449, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 215,316,580 ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (1,024,224,733) ============================================================ Net unrealized appreciation (depreciation) of investment securities $ (808,908,153) ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $5,640,178,117. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating loss and other items on December 31, 2002, undistributed net investment income was increased by $22,645,366 and shares of beneficial interest decreased by $22,645,366. This reclassification had no effect on the net assets of the Fund.
FS-8
BASIC VALUE FUND
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 76,760,537 $1,974,256,884 70,490,380 $1,992,135,991
----------------------------------------------------------------------------------------------------------------------------
Class B 36,719,189 930,261,749 54,343,509 1,495,352,954
----------------------------------------------------------------------------------------------------------------------------
Class C 11,937,042 301,540,951 16,273,481 449,321,584
----------------------------------------------------------------------------------------------------------------------------
Class R* 81,501 1,780,171 -- --
----------------------------------------------------------------------------------------------------------------------------
Institutional Class** 72,939 1,565,277 -- --
============================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 38,557 1,063,809
----------------------------------------------------------------------------------------------------------------------------
Class B -- -- 27,343 726,712
----------------------------------------------------------------------------------------------------------------------------
Class C -- -- 10,073 267,758
============================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 1,123,932 28,176,777 -- --
----------------------------------------------------------------------------------------------------------------------------
Class B (1,169,041) (28,176,777) -- --
============================================================================================================================
Reacquired:
Class A (34,569,714) (825,326,978) (13,646,069) (373,519,475)
----------------------------------------------------------------------------------------------------------------------------
Class B (20,054,811) (454,413,773) (6,954,159) (180,595,976)
----------------------------------------------------------------------------------------------------------------------------
Class C (7,825,922) (178,827,993) (2,629,184) (69,912,943)
----------------------------------------------------------------------------------------------------------------------------
Class R* (16,424) (356,030) -- --
----------------------------------------------------------------------------------------------------------------------------
Institutional Class** (5,945) (142,396) -- --
============================================================================================================================
63,053,283 $1,750,337,862 117,953,931 $3,314,840,414
____________________________________________________________________________________________________________________________
============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-9
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.44 $ 28.41 $ 23.84 $ 18.13 $17.25
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.02)(a) 0.06 0.05(a) 0.04
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.54) 0.06 4.74 5.75 1.16
================================================================================================================================
Total from investment operations (6.58) 0.04 4.80 5.80 1.20
================================================================================================================================
Less distributions:
Dividends from net investment income 0.00 0.00 (0.03) 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
================================================================================================================================
Total distributions 0.00 (0.01) (0.23) (0.09) (0.32)
================================================================================================================================
Net asset value, end of period $ 21.86 $ 28.44 $ 28.41 $ 23.84 $18.13
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (23.14)% 0.16% 20.20% 32.04% 7.02%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534,964 $2,066,536 $448,668 $70,791 $9,074
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.33%(c) 1.30% 1.32% 1.69% 1.74%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.33%(c) 1.30% 1.32% 1.71% 2.11%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.17)%(c) (0.05)% 0.49% 0.23% 0.25%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $2,508,345,697.
CLASS B
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $ 17.79 $ 17.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.09)(a) (0.08)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 5.62 1.15
=================================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 5.53 1.07
=================================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
=================================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $ 23.23 $ 17.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 31.13% 6.34%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,498,499 $1,538,292 $241,157 $55,785 $17,406
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34% 2.39%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36% 2.76%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $1,660,883,829.
FS-10
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $21.07
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.06)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 2.31
==========================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 2.25
==========================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09)
==========================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $23.23
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 10.72%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $518,575 $566,627 $193,863 $7,669
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34%(d)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 30% 20% 56% 63%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $588,489,280.
(d) Annualized.
FS-11
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
-----------------------------------------------------------------------------
Net asset value, beginning of period $ 27.54
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
-----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.65)
=============================================================================
Total from investment operations (5.70)
=============================================================================
Net asset value, end of period $ 21.84
_____________________________________________________________________________
=============================================================================
Total return(b) (20.70)%
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,421
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets 1.54%(c)
=============================================================================
Ratio of net investment income (loss) to average net assets (0.37)%(c)
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate 30%
_____________________________________________________________________________
=============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $569,759.
FS-12
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.63
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06(a)
---------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.74)
=================================================================================
Total from investment operations (7.68)
=================================================================================
Net asset value, end of period $ 21.95
_________________________________________________________________________________
=================================================================================
Total return(b) (25.92)%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,471
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets 0.81%(c)
=================================================================================
Ratio of net investment income to average net assets 0.35%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 30%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $494,705.
FS-13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Mid Cap Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Mid Cap Core Equity Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-14
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-81.75%
ADVERTISING-1.30%
Omnicom Group Inc. 350,000 $ 22,610,000
============================================================================
Aerospace & Defense-2.45%
Northrop Grumman Corp. 245,000 23,765,000
----------------------------------------------------------------------------
Raytheon Co. 615,000 18,911,250
============================================================================
42,676,250
============================================================================
APPLICATION SOFTWARE-1.27%
PeopleSoft, Inc.(a) 1,210,000 22,143,000
============================================================================
BANKS-0.92%
Marshall & Ilsley Corp. 300,000 8,214,000
----------------------------------------------------------------------------
TCF Financial Corp. 180,000 7,864,200
============================================================================
16,078,200
============================================================================
COMPUTER & ELECTRONICS RETAIL-1.41%
Best Buy Co., Inc.(a) 1,020,000 24,633,000
============================================================================
CONSTRUCTION MATERIALS-0.73%
Martin Marietta Materials, Inc. 415,000 12,723,900
============================================================================
DATA PROCESSING SERVICES-4.74%
Ceridian Corp.(a) 2,815,000 40,592,300
----------------------------------------------------------------------------
Certegy Inc.(a) 960,400 23,577,820
----------------------------------------------------------------------------
Convergys Corp.(a) 1,215,000 18,407,250
============================================================================
82,577,370
============================================================================
DIVERSIFIED CHEMICALS-0.95%
Engelhard Corp. 740,000 16,539,000
============================================================================
DIVERSIFIED FINANCIAL SERVICES-1.21%
Principal Financial Group, Inc. 700,000 21,091,000
============================================================================
ELECTRIC UTILITIES-2.43%
FPL Group, Inc. 117,500 7,065,275
----------------------------------------------------------------------------
Wisconsin Energy Corp. 1,400,000 35,280,000
============================================================================
42,345,275
============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.03%
Rockwell Automation, Inc. 870,000 18,017,700
============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-8.65%
Amphenol Corp.-Class A(a) 610,000 23,180,000
----------------------------------------------------------------------------
Diebold, Inc. 430,000 17,724,600
----------------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 655,000 20,999,300
----------------------------------------------------------------------------
Millipore Corp.(a) 450,000 15,300,000
----------------------------------------------------------------------------
Molex Inc.-Class A 658,125 13,090,106
----------------------------------------------------------------------------
Roper Industries, Inc. 580,000 21,228,000
----------------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 670,000 7,490,600
----------------------------------------------------------------------------
Waters Corp.(a) 1,455,000 31,689,900
============================================================================
150,702,506
============================================================================
|
MARKET
SHARES VALUE
----------------------------------------------------------------------------
ENVIRONMENTAL SERVICES-1.80%
Republic Services, Inc.(a) 1,490,000 $ 31,260,200
============================================================================
FOOD RETAIL-2.36%
Kroger Co. (The)(a) 1,500,000 23,175,000
----------------------------------------------------------------------------
Safeway Inc.(a) 770,000 17,987,200
============================================================================
41,162,200
============================================================================
FOOTWEAR-1.30%
NIKE, Inc.-Class B 507,900 22,586,313
============================================================================
FOREST PRODUCTS-0.83%
Louisiana-Pacific Corp.(a) 1,787,100 14,404,026
============================================================================
GENERAL MERCHANDISE STORES-1.97%
BJ's Wholesale Club, Inc.(a) 885,000 16,195,500
----------------------------------------------------------------------------
Family Dollar Stores, Inc. 582,000 18,164,220
============================================================================
34,359,720
============================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-1.80%
IMS Health Inc. 1,960,000 31,360,000
============================================================================
HEALTH CARE EQUIPMENT-3.97%
Apogent Technologies Inc.(a) 1,675,000 34,840,000
----------------------------------------------------------------------------
Bard (C.R.), Inc. 290,000 16,820,000
----------------------------------------------------------------------------
Beckman Coulter, Inc. 590,000 17,416,800
============================================================================
69,076,800
============================================================================
HOME FURNISHINGS-1.34%
Mohawk Industries, Inc.(a) 410,420 23,373,419
============================================================================
HOUSEHOLD APPLIANCES-1.94%
Black & Decker Corp. (The) 390,000 16,727,100
----------------------------------------------------------------------------
Whirlpool Corp. 325,000 16,971,500
============================================================================
33,698,600
============================================================================
HOUSEHOLD PRODUCTS-1.25%
Dial Corp. (The) 1,072,100 21,838,677
============================================================================
HOUSEWARES & SPECIALTIES-0.64%
Fortune Brands, Inc. 240,000 11,162,400
============================================================================
INDUSTRIAL MACHINERY-6.57%
Dover Corp. 1,420,000 41,407,200
----------------------------------------------------------------------------
Flowserve Corp.(a) 840,000 12,423,600
----------------------------------------------------------------------------
ITT Industries, Inc. 165,000 10,013,850
----------------------------------------------------------------------------
Kennametal Inc. 370,000 12,757,600
----------------------------------------------------------------------------
Pentair, Inc. 540,000 18,657,000
----------------------------------------------------------------------------
SPX Corp.(a) 514,000 19,249,300
============================================================================
114,508,550
============================================================================
IT CONSULTING & SERVICES-1.01%
Affiliated Computer Services, Inc.-Class A(a) 335,000 17,637,750
============================================================================
Leisure Products-2.64%
Brunswick Corp. 1,750,000 34,755,000
----------------------------------------------------------------------------
|
FS-15
MARKET
SHARES VALUE
----------------------------------------------------------------------------
LEISURE PRODUCTS-(CONTINUED)
Mattel, Inc. 586,000 $ 11,221,900
============================================================================
45,976,900
============================================================================
METAL & GLASS CONTAINERS-1.03%
Pactiv Corp.(a) 820,000 17,925,200
============================================================================
OFFICE ELECTRONICS-0.86%
Zebra Technologies Corp.-Class A(a) 260,000 14,898,000
============================================================================
OFFICE SERVICES & SUPPLIES-1.47%
Herman Miller, Inc. 1,390,000 25,576,000
============================================================================
OIL & GAS DRILLING-0.71%
Noble Corp. (Cayman Islands)(a) 350,000 12,302,500
============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.23%
BJ Services Co.(a) 420,000 13,570,200
----------------------------------------------------------------------------
Cooper Cameron Corp.(a) 265,000 13,202,300
----------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 300,000 11,979,000
============================================================================
38,751,500
============================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.11%
Valero Energy Corp. 525,000 19,393,500
============================================================================
Packaged Foods & Meats-1.00%
Campbell Soup Co. 740,000 17,367,800
============================================================================
PERSONAL PRODUCTS-1.27%
Avon Products, Inc. 410,000 22,086,700
============================================================================
PHARMACEUTICALS-1.88%
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 572,000 22,084,920
----------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 380,000 10,742,600
============================================================================
32,827,520
============================================================================
PROPERTY & CASUALTY INSURANCE-2.56%
ACE Ltd. (Cayman Islands) 805,000 23,618,700
----------------------------------------------------------------------------
MGIC Investment Corp. 319,300 13,187,090
----------------------------------------------------------------------------
XL Capital Ltd.-Class A (Cayman Islands) 100,000 7,725,000
============================================================================
44,530,790
============================================================================
RAILROADS-0.61%
Norfolk Southern Corp. 530,000 10,594,700
============================================================================
RESTAURANTS-1.90%
Jack in the Box Inc.(a) 857,800 14,831,362
----------------------------------------------------------------------------
Outback Steakhouse, Inc. 530,000 18,253,200
============================================================================
33,084,562
============================================================================
|
MARKET
SHARES VALUE
----------------------------------------------------------------------------
Semiconductor Equipment-0.79%
Novellus Systems, Inc.(a) 490,000 $ 13,759,200
============================================================================
SEMICONDUCTORS-1.63%
Microchip Technology Inc. 582,500 14,242,125
----------------------------------------------------------------------------
Xilinx, Inc.(a) 690,000 14,214,000
============================================================================
28,456,125
============================================================================
SPECIALTY CHEMICALS-0.96%
Rohm & Haas Co. 515,000 16,727,200
============================================================================
SPECIALTY STORES-0.71%
Barnes & Noble, Inc.(a) 685,000 12,377,950
============================================================================
SYSTEMS SOFTWARE-3.45%
BMC Software, Inc.(a) 970,000 16,596,700
----------------------------------------------------------------------------
Computer Associates International, Inc. 3,227,500 43,571,250
============================================================================
60,167,950
============================================================================
TELECOMMUNICATIONS EQUIPMENT-1.07%
Advanced Fibre Communications, Inc.(a) 1,115,000 18,598,200
============================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,490,279,051) 1,423,968,153
============================================================================
MONEY MARKET FUNDS-21.56%
STIC Liquid Assets Portfolio(b) 187,767,715 187,767,715
----------------------------------------------------------------------------
STIC Prime Portfolio(b) 187,767,716 187,767,716
============================================================================
Total Money Market Funds (Cost
$375,535,431) 375,535,431
============================================================================
TOTAL INVESTMENTS-103.31% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$1,865,814,482) 1,799,503,584
============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-7.34%
STIC Liquid Assets Portfolio(b)(c) 63,966,375 63,966,375
----------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 63,966,376 63,966,376
============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $127,932,751) 127,932,751
============================================================================
TOTAL INVESTMENTS-110.65% (Cost
$1,993,747,233) 1,927,436,335
============================================================================
OTHER ASSETS LESS LIABILITIES-(10.65%) (185,507,301)
============================================================================
NET ASSETS-100.00% $1,741,929,034
____________________________________________________________________________
============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-16
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$1,993,747,233)* $1,927,436,335
------------------------------------------------------------
Receivables for:
Investments sold 3,897,633
------------------------------------------------------------
Fund shares sold 12,584,280
------------------------------------------------------------
Dividends 1,174,875
------------------------------------------------------------
Investment for deferred compensation plan 6,352
------------------------------------------------------------
Other assets 86,718
============================================================
Total assets 1,945,186,193
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 69,367,438
------------------------------------------------------------
Fund shares reacquired 3,388,328
------------------------------------------------------------
Deferred compensation plan 6,352
------------------------------------------------------------
Collateral upon return of securities
loaned 127,932,751
------------------------------------------------------------
Accrued distribution fees 1,655,777
------------------------------------------------------------
Accrued transfer agent fees 772,266
------------------------------------------------------------
Accrued operating expenses 134,247
============================================================
Total liabilities 203,257,159
============================================================
Net assets applicable to shares outstanding $1,741,929,034
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,072,673,267
____________________________________________________________
============================================================
Class B $ 500,166,316
____________________________________________________________
============================================================
Class C $ 161,486,733
____________________________________________________________
============================================================
Class R $ 2,785,524
____________________________________________________________
============================================================
Institutional Class $ 4,817,194
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 50,664,905
____________________________________________________________
============================================================
Class B 25,744,337
____________________________________________________________
============================================================
Class C 8,320,943
____________________________________________________________
============================================================
Class R 131,543
____________________________________________________________
============================================================
Institutional Class 226,441
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.17
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.17 divided by
94.50%) $ 22.40
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.43
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.41
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.18
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 21.27
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $125,936,123 were on loan to brokers. Statement of Operations
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$19,656) $ 9,465,481
------------------------------------------------------------
Dividends from affiliated money market funds 4,507,221
------------------------------------------------------------
Interest 23,988
------------------------------------------------------------
Security lending income 207,786
============================================================
Total investment income 14,204,476
============================================================
EXPENSES:
Advisory fees 9,735,227
------------------------------------------------------------
Administrative services fees 274,931
------------------------------------------------------------
Custodian fees 72,067
------------------------------------------------------------
Distribution fees -- Class A 2,838,084
------------------------------------------------------------
Distribution fees -- Class B 4,506,502
------------------------------------------------------------
Distribution fees -- Class C 1,224,586
------------------------------------------------------------
Distribution fees -- Class R 2,428
------------------------------------------------------------
Transfer agent fees 4,231,264
------------------------------------------------------------
Trustees' fees 15,936
------------------------------------------------------------
Other 631,091
============================================================
Total expenses 23,532,116
============================================================
Less: Fees waived (42,589)
------------------------------------------------------------
Expenses paid indirectly (22,811)
============================================================
Net expenses 23,466,716
============================================================
Net investment income (loss) (9,262,240)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (22,288,653)
============================================================
Change in net unrealized appreciation
(depreciation) of investment securities (166,482,913)
============================================================
Net gain (loss) from investment securities (188,771,566)
============================================================
Net increase (decrease) in net assets
resulting from operations $(198,033,806)
____________________________________________________________
============================================================
|
See Notes to Financial Statements.
FS-17
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (9,262,240) $ (3,420,458)
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (22,288,653) 2,072,999
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (166,482,913) 2,353,011
============================================================================================
Net increase (decrease) in net assets resulting from
operations (198,033,806) 1,005,552
============================================================================================
Distributions to shareholders from net investment income:
Class A -- (296,068)
--------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,222,471) (5,805,537)
--------------------------------------------------------------------------------------------
Class B (638,804) (4,360,649)
--------------------------------------------------------------------------------------------
Class C (201,407) (866,613)
--------------------------------------------------------------------------------------------
Class R (2,622) --
--------------------------------------------------------------------------------------------
Institutional Class (5,457) --
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A 695,280,419 233,958,818
--------------------------------------------------------------------------------------------
Class B 234,195,517 129,312,140
--------------------------------------------------------------------------------------------
Class C 112,522,467 49,161,867
--------------------------------------------------------------------------------------------
Class R 2,780,637 --
--------------------------------------------------------------------------------------------
Institutional Class 5,267,651 --
============================================================================================
Net increase in net assets 849,942,124 402,109,510
============================================================================================
NET ASSETS:
Beginning of year 891,986,910 489,877,400
============================================================================================
End of year $1,741,929,034 $891,986,910
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,831,543,175 $790,745,950
--------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (18,142) (2,209)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (23,285,101) 1,071,154
--------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (66,310,898) 100,172,015
============================================================================================
$1,741,929,034 $891,986,910
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-18
Notes to Financial Statements
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Core Equity Fund, formerly Mid Cap Equity Fund, (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class 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 ("CDSC"). Under some circumstances, Class A and Class R shares are subject to CDSC charges. Class R shares and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. 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 long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
FS-19
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $42,589.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $274,931 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $2,066,301 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $2,838,084, $4,506,502, $1,224,586 and $2,428, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $804,255 in front-end sales commissions from the sale of Class A shares and $10,007, $5,858, $57,073 and $0 for Class A, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $4,808 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $21,728 and reductions in custodian fees of $1,083 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $22,811.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $125,936,123 were on loan to brokers. The loans were secured by cash collateral of $127,932,751 received by the Fund and subsequently invested in affiliated money market funds as follows: $63,966,375 in STIC Liquid
FS-20
Assets Portfolio and $63,966,376 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $207,786 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ -- $ 8,866,797
--------------------------------------------------------------
Long-term capital gain 2,070,761 2,462,070
==============================================================
$2,070,761 $11,328,867
______________________________________________________________
==============================================================
|
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (67,307,346)
------------------------------------------------------------
Temporary book/tax differences (18,142)
------------------------------------------------------------
Capital loss carryforward (20,731,654)
------------------------------------------------------------
Post-October capital loss deferral (1,556,999)
------------------------------------------------------------
Shares of beneficial interest 1,831,543,175
============================================================
$1,741,929,034
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
December 31, 2010 $20,731,654
__________________________________________________________
==========================================================
|
NOTE 8--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, 2002 was $1,326,677,586 and $431,849,397 respectively.
The amount of unrealized appreciation of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 76,091,115 ------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (143,398,461) ============================================================= Net unrealized appreciation (depreciation) of investment securities $ (67,307,346) _____________________________________________________________ ============================================================= Cost of investments for tax purposes is $1,994,743,681. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating losses and other items on December 31, 2002, undistributed net investment income was increased by $9,246,307, undistributed net realized gains increased by $3,159 and shares of beneficial interest decreased by $9,249,466. This reclassification had no effect on the net assets of the Fund.
FS-21
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 41,067,783 $ 939,876,985 14,841,455 $ 353,924,188
--------------------------------------------------------------------------------------------------------------------------
Class B 17,990,585 384,974,124 9,689,738 214,751,567
--------------------------------------------------------------------------------------------------------------------------
Class C 6,877,437 145,718,898 2,868,456 63,101,217
--------------------------------------------------------------------------------------------------------------------------
Class R* 140,266 2,963,401 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** 263,499 6,068,412 -- --
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 55,181 1,164,373 247,762 5,748,094
--------------------------------------------------------------------------------------------------------------------------
Class B 31,286 606,185 191,629 4,107,954
--------------------------------------------------------------------------------------------------------------------------
Class C 9,824 190,001 37,928 812,196
--------------------------------------------------------------------------------------------------------------------------
Class R* 124 2,622 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** 257 5,457 -- --
==========================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 1,600,496 36,525,348 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B (1,736,124) (36,525,348) -- --
==========================================================================================================================
Reacquired:
Class A (12,610,500) (282,286,287) (5,345,950) (125,713,464)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,692,653) (114,859,444) (4,149,104) (89,547,381)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,660,523) (33,386,432) (683,809) (14,751,546)
--------------------------------------------------------------------------------------------------------------------------
Class R* (8,847) (185,386) -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** (37,315) (806,218) -- --
==========================================================================================================================
46,290,776 $1,050,046,691 17,698,105 $ 412,432,825
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-22
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.85 $ 24.04 $ 23.48 $ 18.97 $ 21.01
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.05)(a) 0.10(a) (0.01)(a) (0.24)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.56) 0.18 4.10 6.88 (0.81)
===============================================================================================================================
Total from investment operations (2.65) 0.13 4.20 6.87 (1.05)
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.02) -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.03) (0.30) (3.64) (2.36) (0.99)
===============================================================================================================================
Total distributions (0.03) (0.32) (3.64) (2.36) (0.99)
===============================================================================================================================
Net asset value, end of period $ 21.17 $ 23.85 $ 24.04 $ 23.48 $ 18.97
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) (11.13)% 0.56% 18.76% 37.13% (4.71)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,072,673 $490,118 $259,803 $178,550 $180,258
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.43%(c) 1.39% 1.37% 1.46% 1.56%(d)
===============================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.40)%(c) (0.22)% 0.38% (0.07)% (1.09)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $810,880,938.
(d) Ratio includes waiver and expense reductions. Ratio of expense to
average net assets excluding waiver and expense reduction was 1.57%.
CLASS B
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.03 $ 22.36 $ 22.21 $ 18.16 $ 20.31
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.14)(a) (0.38)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.35) 0.16 3.86 6.55 (0.78)
==============================================================================================================================
Total from investment operations (2.57) (0.03) 3.79 6.41 (1.16)
==============================================================================================================================
Less distributions from net realized gains (0.03) (0.30) (3.64) (2.36) (0.99)
==============================================================================================================================
Net asset value, end of period $ 19.43 $ 22.03 $ 22.36 $ 22.21 $ 18.16
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (11.69)% (0.10)% 17.98% 36.25% (5.41)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $500,166 $333,783 $210,608 $151,392 $165,447
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 2.08%(c) 2.05% 2.02% 2.11% 2.21%(d)
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.05)%(c) (0.87)% (0.27)% (0.72)% (1.74)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $450,650,215.
(d) Ratio includes waiver and expense reductions. Ratio of expense to
average net assets excluding waiver and expense reduction was 2.22%.
FS-23
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.00 $ 22.33 $ 22.19 $19.02
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.10)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.34) 0.16 3.85 5.63
=========================================================================================================================
Total from investment operations (2.56) (0.03) 3.78 5.53
=========================================================================================================================
Less distributions from net realized gains (0.03) (0.30) (3.64) (2.36)
=========================================================================================================================
Net asset value, end of period $ 19.41 $ 22.00 $ 22.33 $22.19
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) (11.66)% (0.10)% 17.95% 29.98%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $161,487 $68,085 $19,466 $1,564
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 2.08%(c) 2.05% 2.02% 2.11%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.05)%(c) (0.87)% (0.27)% (0.72)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 38% 68% 72% 90%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $122,458,622.
(d) Annualized.
FS-24
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------
Net asset value, beginning of period $ 24.54
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.26)
===========================================================================
Total from investment operations (3.33)
===========================================================================
Less distributions from net realized gains (0.03)
===========================================================================
Net asset value, end of period $ 21.18
___________________________________________________________________________
===========================================================================
Total return(b) (13.59)%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,786
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets 1.58%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (0.55)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 38%
___________________________________________________________________________
===========================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $840,074.
FS-25
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS I
--------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
----------------------------------------------------------------------------
Net asset value, beginning of period $ 25.03
----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)
----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.77)
============================================================================
Total from investment operations (3.73)
============================================================================
Less distributions from net realized gains (0.03)
============================================================================
Net asset value, end of period $ 21.27
____________________________________________________________________________
============================================================================
Total return(b) (14.92)%
____________________________________________________________________________
============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,817
____________________________________________________________________________
============================================================================
Ratio of expenses to average net assets 0.82%(c)
============================================================================
Ratio of net investment income to average net assets 0.21%(c)
____________________________________________________________________________
============================================================================
Portfolio turnover rate 38%
____________________________________________________________________________
============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,810,072.
FS-26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Small Cap Growth Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-27
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-87.55%
AEROSPACE & DEFENSE-1.20%
Aeroflex Inc.(a) 425,000 $ 2,932,500
-------------------------------------------------------------------------------
Armor Holdings, Inc.(a) 175,000 2,409,750
-------------------------------------------------------------------------------
Engineered Support Systems, Inc. 120,000 4,399,200
-------------------------------------------------------------------------------
Integrated Defense Technologies, Inc.(a) 150,000 2,175,000
===============================================================================
11,916,450
===============================================================================
AIRLINES-0.24%
Frontier Airlines, Inc.(a) 350,000 2,366,000
===============================================================================
APPAREL RETAIL-3.88%
Chico's FAS, Inc.(a) 425,000 8,036,750
-------------------------------------------------------------------------------
Christopher & Banks Corp.(a) 210,700 4,372,025
-------------------------------------------------------------------------------
Gymboree Corp. (The)(a) 325,000 5,154,500
-------------------------------------------------------------------------------
Hot Topic, Inc.(a) 275,000 6,292,000
-------------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 315,000 5,572,350
-------------------------------------------------------------------------------
Too Inc.(a) 230,000 5,409,600
-------------------------------------------------------------------------------
Urban Outfitters, Inc.(a) 150,000 3,535,500
===============================================================================
38,372,725
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.76%
Fossil, Inc.(a) 175,000 3,559,500
-------------------------------------------------------------------------------
Quicksilver, Inc.(a) 150,000 3,999,000
===============================================================================
7,558,500
===============================================================================
APPLICATION SOFTWARE-4.96%
Activision, Inc.(a) 125,000 1,823,750
-------------------------------------------------------------------------------
Autodesk, Inc. 225,000 3,217,500
-------------------------------------------------------------------------------
Business Objects S.A.-ADR (France)(a) 225,000 3,375,000
-------------------------------------------------------------------------------
Catapult Communications Corp.(a) 135,000 1,613,250
-------------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 200,000 4,690,000
-------------------------------------------------------------------------------
Documentum, Inc.(a) 400,000 6,264,000
-------------------------------------------------------------------------------
EPIQ Systems, Inc.(a) 200,000 3,064,000
-------------------------------------------------------------------------------
FactSet Research Systems Inc. 170,000 4,805,900
-------------------------------------------------------------------------------
Kronos Inc.(a) 100,000 3,699,000
-------------------------------------------------------------------------------
Macromedia, Inc.(a) 500,000 5,325,000
-------------------------------------------------------------------------------
National Instruments Corp.(a) 200,000 6,498,000
-------------------------------------------------------------------------------
Take-Two Interactive Software, Inc.(a) 200,000 4,698,000
===============================================================================
49,073,400
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.27%
Superior Industries International, Inc. 65,000 $ 2,688,400
===============================================================================
AUTOMOBILE MANUFACTURERS-0.42%
Monaco Coach Corp.(a) 250,000 4,137,500
===============================================================================
BANKS-2.39%
East West Bancorp., Inc. 100,000 3,608,000
-------------------------------------------------------------------------------
Prosperity Bancshares, Inc. 225,000 4,275,000
-------------------------------------------------------------------------------
Silicon Valley Bancshares(a) 150,000 2,737,500
-------------------------------------------------------------------------------
Southwest Bancorp. of Texas, Inc.(a) 150,250 4,328,702
-------------------------------------------------------------------------------
Sterling Bancshares, Inc. 162,500 1,985,750
-------------------------------------------------------------------------------
UCBH Holdings, Inc. 100,000 4,245,000
-------------------------------------------------------------------------------
Whitney Holding Corp. 75,000 2,499,750
===============================================================================
23,679,702
===============================================================================
BIOTECHNOLOGY-3.58%
Affymetrix, Inc.(a) 200,000 4,578,000
-------------------------------------------------------------------------------
Albany Molecular Research, Inc.(a) 175,000 2,588,425
-------------------------------------------------------------------------------
Array BioPharma Inc.(a) 250,000 1,387,500
-------------------------------------------------------------------------------
Cephalon, Inc.(a) 65,299 3,177,972
-------------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(a) 175,000 6,734,000
-------------------------------------------------------------------------------
Connectics Corp.(a) 275,000 3,305,500
-------------------------------------------------------------------------------
Genencor International Inc.(a) 175,000 1,711,500
-------------------------------------------------------------------------------
Invitrogen Corp.(a) 125,000 3,916,250
-------------------------------------------------------------------------------
SangStat Medical Corp.(a) 264,000 2,983,200
-------------------------------------------------------------------------------
Techne Corp.(a) 175,000 4,999,400
===============================================================================
35,381,747
===============================================================================
BROADCASTING & CABLE TV-1.95%
Cox Radio, Inc.-Class A(a) 110,000 2,509,100
-------------------------------------------------------------------------------
Entercom Communications Corp.(a) 55,000 2,580,600
-------------------------------------------------------------------------------
Entravision Communications Corp.-Class A(a) 450,000 4,491,000
-------------------------------------------------------------------------------
Radio One, Inc.-Class A(a) 225,000 3,289,500
-------------------------------------------------------------------------------
Radio One, Inc.-Class D(a) 265,000 3,823,950
-------------------------------------------------------------------------------
TiVo Inc.(a) 500,000 2,615,000
===============================================================================
19,309,150
===============================================================================
BUILDING PRODUCTS-0.36%
Trex Co., Inc.(a) 100,000 3,530,000
===============================================================================
Casinos & Gambling-1.22%
Alliance Gaming Corp.(a) 250,000 4,257,500
-------------------------------------------------------------------------------
Shuffle Master, Inc.(a) 200,000 3,822,000
-------------------------------------------------------------------------------
|
FS-28
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
CASINOS & GAMBLING-(CONTINUED)
Station Casinos, Inc.(a) 225,000 $ 3,982,500
===============================================================================
12,062,000
===============================================================================
CATALOG RETAIL-0.72%
Insight Enterprises, Inc.(a) 350,000 2,908,500
-------------------------------------------------------------------------------
J. Jill Group Inc.(a) 300,000 4,194,000
===============================================================================
7,102,500
===============================================================================
COMMODITY CHEMICALS-0.46%
Spartech Corp. 175,000 3,610,250
-------------------------------------------------------------------------------
Summa Industries(a) 100,000 958,000
===============================================================================
4,568,250
===============================================================================
COMPUTER & ELECTRONICS RETAIL-0.27%
GameStop Corp.(a) 275,000 2,695,000
===============================================================================
COMPUTER HARDWARE-0.69%
Pinnacle Systems, Inc.(a) 500,000 6,805,000
===============================================================================
COMPUTER STORAGE & PERIPHERALS-0.87%
Applied Films Corp.(a) 300,000 5,997,000
-------------------------------------------------------------------------------
M-Systems Flash Disk Pioneers Ltd.
(Israel)(a) 350,000 2,558,500
===============================================================================
8,555,500
===============================================================================
CONSTRUCTION & ENGINEERING-0.25%
Shaw Group Inc. (The)(a) 150,000 2,467,500
===============================================================================
Construction, Farm Machinery & Heavy
Trucks-0.30%
AGCO Corp.(a) 135,000 2,983,500
===============================================================================
CONSUMER FINANCE-0.35%
Doral Financial Corp. (Puerto Rico) 120,000 3,432,000
===============================================================================
DATA PROCESSING SERVICES-1.68%
eSPEED, Inc.-Class A(a) 200,000 3,388,200
-------------------------------------------------------------------------------
InterCept, Inc.(a) 150,000 2,539,650
-------------------------------------------------------------------------------
Iron Mountain Inc.(a) 186,225 6,147,287
-------------------------------------------------------------------------------
ProBusiness Services, Inc.(a) 450,000 4,500,000
===============================================================================
16,575,137
===============================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.39%
Career Education Corp.(a) 100,000 4,000,000
-------------------------------------------------------------------------------
Coinstar, Inc.(a) 150,000 3,397,500
-------------------------------------------------------------------------------
Corinthian Colleges, Inc.(a) 100,000 3,786,000
-------------------------------------------------------------------------------
Corporate Executive Board Co. (The)(a) 200,000 6,384,000
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Education Management Corp.(a) 150,000 $ 5,640,000
-------------------------------------------------------------------------------
FTI Consulting, Inc.(a) 100,000 4,015,000
-------------------------------------------------------------------------------
NCO Group, Inc.(a) 200,000 3,190,000
-------------------------------------------------------------------------------
PRG-Schultz International, Inc.(a) 350,000 3,115,000
===============================================================================
33,527,500
===============================================================================
DIVERSIFIED FINANCIAL SERVICES-0.99%
Affiliated Managers Group, Inc.(a) 70,000 3,521,000
-------------------------------------------------------------------------------
Euronet Worldwide, Inc.(a) 465,000 3,492,150
-------------------------------------------------------------------------------
Investors Financial Services Corp. 100,000 2,739,000
===============================================================================
9,752,150
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.51%
II-VI Inc.(a) 180,000 2,890,800
-------------------------------------------------------------------------------
Power-One, Inc.(a) 375,000 2,126,250
===============================================================================
5,017,050
===============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-3.35%
FLIR Systems, Inc.(a) 120,000 5,856,000
-------------------------------------------------------------------------------
Keithley Instruments, Inc. 280,000 3,500,000
-------------------------------------------------------------------------------
KEMET Corp.(a) 250,000 2,185,000
-------------------------------------------------------------------------------
Photon Dynamics, Inc.(a) 250,000 5,700,000
-------------------------------------------------------------------------------
ScanSource, Inc.(a) 85,000 4,190,500
-------------------------------------------------------------------------------
Tektronix, Inc.(a) 250,000 4,547,500
-------------------------------------------------------------------------------
Varian Inc.(a) 250,000 7,172,500
===============================================================================
33,151,500
===============================================================================
ENVIRONMENTAL SERVICES-1.21%
Stericycle, Inc.(a) 160,000 5,180,640
-------------------------------------------------------------------------------
Waste Connections, Inc.(a) 175,000 6,756,750
===============================================================================
11,937,390
===============================================================================
FOOD DISTRIBUTORS-1.33%
Performance Food Group Co.(a) 200,000 6,791,800
-------------------------------------------------------------------------------
United Natural Foods, Inc.(a) 250,000 6,337,500
===============================================================================
13,129,300
===============================================================================
FOOD RETAIL-0.53%
Whole Foods Market, Inc.(a) 100,000 5,273,000
===============================================================================
GENERAL MERCHANDISE STORES-1.07%
99 Cents Only Stores(a) 225,000 6,043,500
-------------------------------------------------------------------------------
Fred's, Inc. 175,000 4,497,500
===============================================================================
10,541,000
===============================================================================
|
FS-29
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS & SERVICES-6.97%
Accredo Health, Inc.(a) 270,000 $ 9,517,500
-------------------------------------------------------------------------------
Advisory Board Co. (The)(a) 150,000 4,485,000
-------------------------------------------------------------------------------
Cerner Corp.(a) 175,000 5,470,500
-------------------------------------------------------------------------------
Covance Inc.(a) 140,000 3,442,600
-------------------------------------------------------------------------------
DaVita, Inc.(a) 200,000 4,934,000
-------------------------------------------------------------------------------
DIANON Systems, Inc.(a) 125,000 5,963,750
-------------------------------------------------------------------------------
Express Scripts, Inc.(a) 100,000 4,804,000
-------------------------------------------------------------------------------
First Horizon Pharmaceutical Corp.(a) 225,000 1,682,550
-------------------------------------------------------------------------------
ICON PLC-ADR (Ireland)(a) 150,000 4,036,500
-------------------------------------------------------------------------------
IMPAC Medical Systems, Inc.(a) 157,200 2,911,344
-------------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 90,000 2,091,600
-------------------------------------------------------------------------------
Odyssey Healthcare, Inc.(a) 125,000 4,337,500
-------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 120,000 4,807,200
-------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc.(a) 200,000 5,854,000
-------------------------------------------------------------------------------
Priority Healthcare Corp.-Class B(a) 200,000 4,640,000
===============================================================================
68,978,044
===============================================================================
HEALTH CARE EQUIPMENT-5.76%
Advanced Neuromodulation Systems, Inc.(a) 68,100 2,390,310
-------------------------------------------------------------------------------
American Medical Systems Holdings, Inc.(a) 150,000 2,431,500
-------------------------------------------------------------------------------
Biosite Diagnostics Inc.(a) 125,000 4,252,500
-------------------------------------------------------------------------------
Bruker AXS Inc.(a) 500,000 905,000
-------------------------------------------------------------------------------
Bruker Daltonics, Inc.(a) 300,000 1,458,000
-------------------------------------------------------------------------------
CTI Molecular Imaging, Inc.(a) 125,000 3,082,500
-------------------------------------------------------------------------------
Cytyc Corp.(a) 500,000 5,100,000
-------------------------------------------------------------------------------
Diagnostic Products Corp. 115,000 4,441,300
-------------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 85,000 2,556,800
-------------------------------------------------------------------------------
Integra LifeSciences Holdings(a) 175,000 3,088,750
-------------------------------------------------------------------------------
Med-Design Corp. (The)(a) 300,000 2,417,400
-------------------------------------------------------------------------------
ResMed Inc. 160,000 4,891,200
-------------------------------------------------------------------------------
STERIS Corp.(a) 200,000 4,850,000
-------------------------------------------------------------------------------
Wilson Greatbatch Technologies, Inc.(a) 250,000 7,300,000
-------------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 150,000 2,618,850
-------------------------------------------------------------------------------
Zoll Medical Corp.(a) 145,000 5,172,150
===============================================================================
56,956,260
===============================================================================
HEALTH CARE FACILITIES-1.42%
LifePoint Hospitals, Inc.(a) 270,000 8,081,370
-------------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 200,000 5,966,000
===============================================================================
14,047,370
===============================================================================
HEALTH CARE SUPPLIES-0.57%
ICU Medical, Inc.(a) 150,000 5,595,000
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
HOMEBUILDING-0.46%
D.R. Horton, Inc. 147,375 $ 2,556,956
-------------------------------------------------------------------------------
Toll Brothers, Inc.(a) 100,000 2,020,000
===============================================================================
4,576,956
===============================================================================
HOTELS, RESORTS & CRUISE LINES-0.30%
Kerzner International Ltd. (Bahamas)(a) 150,000 3,012,000
===============================================================================
INDUSTRIAL MACHINERY-0.19%
Manitiwoc Co., Inc. (The) 75,000 1,912,500
===============================================================================
INSURANCE BROKERS-0.41%
Hilb, Rogal and Hamilton Co. 100,000 4,090,000
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.13%
Intrado Inc.(a) 130,000 1,274,000
===============================================================================
INTERNET SOFTWARE & SERVICES-1.41%
Digital Insight Corp.(a) 175,000 1,520,750
-------------------------------------------------------------------------------
DoubleClick Inc.(a) 350,000 1,981,000
-------------------------------------------------------------------------------
Internet Security Systems, Inc.(a) 175,000 3,207,750
-------------------------------------------------------------------------------
OneSource Information Services, Inc.(a) 250,000 1,925,000
-------------------------------------------------------------------------------
Websense, Inc.(a) 250,000 5,340,250
===============================================================================
13,974,750
===============================================================================
IT CONSULTING & SERVICES-1.17%
CACI International Inc.-Class A(a) 150,000 5,346,000
-------------------------------------------------------------------------------
Forrester Research, Inc.(a) 200,000 3,114,000
-------------------------------------------------------------------------------
Titan Corp. (The)(a) 300,000 3,120,000
===============================================================================
11,580,000
===============================================================================
MANAGED HEALTH CARE-0.75%
Centene Corp.(a) 75,000 2,519,250
-------------------------------------------------------------------------------
First Health Group Corp.(a) 200,000 4,870,000
===============================================================================
7,389,250
===============================================================================
MOVIES & ENTERTAINMENT-1.33%
Macrovision Corp.(a) 275,000 4,411,000
-------------------------------------------------------------------------------
Pixar, Inc.(a) 125,000 6,623,750
-------------------------------------------------------------------------------
Regal Entertainment Group-Class A 100,000 2,142,000
===============================================================================
13,176,750
===============================================================================
MULTI-LINE INSURANCE-0.50%
HCC Insurance Holdings, Inc. 200,000 4,920,000
===============================================================================
NETWORKING EQUIPMENT-0.95%
Avocent Corp.(a) 235,000 5,221,700
-------------------------------------------------------------------------------
|
FS-30
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
NETWORKING EQUIPMENT-(CONTINUED)
NetScreen Technologies, Inc.(a) 250,000 $ 4,210,000
===============================================================================
9,431,700
===============================================================================
OFFICE SERVICES & SUPPLIES-0.30%
Daisytek International Corp.(a) 250,000 1,982,500
-------------------------------------------------------------------------------
MCSi, Inc.(a) 200,000 950,000
===============================================================================
2,932,500
===============================================================================
OIL & GAS DRILLING-1.83%
National-Oilwell, Inc.(a) 125,000 2,730,000
-------------------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 260,000 7,844,200
-------------------------------------------------------------------------------
Pride International, Inc.(a) 300,000 4,470,000
-------------------------------------------------------------------------------
Varco International, Inc.(a) 175,000 3,045,000
===============================================================================
18,089,200
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-3.32%
Cal Dive International, Inc.(a) 350,000 8,225,000
-------------------------------------------------------------------------------
FMC Technologies, Inc.(a) 200,000 4,086,000
-------------------------------------------------------------------------------
GulfMark Offshore, Inc.(a) 300,000 4,425,000
-------------------------------------------------------------------------------
Key Energy Services, Inc.(a) 550,000 4,933,500
-------------------------------------------------------------------------------
Newpark Resources, Inc.(a) 500,000 2,175,000
-------------------------------------------------------------------------------
TETRA Technologies, Inc.(a) 150,000 3,205,500
-------------------------------------------------------------------------------
Universal Compression Holdings, Inc.(a) 200,000 3,826,000
-------------------------------------------------------------------------------
Willbros Group, Inc. (Panama)(a) 240,000 1,972,800
===============================================================================
32,848,800
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.81%
Chesapeake Energy Corp. 700,000 5,418,000
-------------------------------------------------------------------------------
Forest Oil Corp.(a) 150,000 4,147,500
-------------------------------------------------------------------------------
Newfield Exploration Co.(a) 125,000 4,506,250
-------------------------------------------------------------------------------
Spinnaker Exploration Co.(a) 175,000 3,858,750
===============================================================================
17,930,500
===============================================================================
PACKAGED FOODS & MEATS-0.33%
Horizon Organic Holding Corp.(a) 200,000 3,238,000
===============================================================================
Personal Products-0.28%
Steiner Leisure Ltd.(a) 200,000 2,788,000
===============================================================================
PHARMACEUTICALS-1.81%
aaiPharma Inc.(a) 200,000 2,804,000
-------------------------------------------------------------------------------
Barr Laboratories, Inc.(a) 50,000 3,254,500
-------------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(a) 125,000 6,208,750
-------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 150,000 5,640,000
===============================================================================
17,907,250
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-0.40%
Fidelity National Financial, Inc. 121,000 $ 3,972,430
===============================================================================
PUBLISHING-0.77%
Getty Images, Inc.(a) 250,000 7,637,500
===============================================================================
RESTAURANTS-3.09%
Cosi, Inc.(a) 254,100 1,412,796
-------------------------------------------------------------------------------
Krispy Kreme Doughnuts, Inc.(a) 120,000 4,052,400
-------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(a) 200,000 7,260,000
-------------------------------------------------------------------------------
Panera Bread Co.-Class A(a) 175,000 6,091,750
-------------------------------------------------------------------------------
RARE Hospitality International, Inc.(a) 215,000 5,938,300
-------------------------------------------------------------------------------
Sonic Corp.(a) 281,250 5,762,813
===============================================================================
30,518,059
===============================================================================
SEMICONDUCTOR EQUIPMENT-2.46%
Advanced Energy Industries, Inc.(a) 150,000 1,908,000
-------------------------------------------------------------------------------
ASE Test Ltd. (Taiwan)(a) 325,000 1,300,000
-------------------------------------------------------------------------------
Asyst Technologies, Inc.(a) 325,000 2,388,750
-------------------------------------------------------------------------------
Credence Systems Corp.(a) 240,000 2,239,200
-------------------------------------------------------------------------------
Cymer, Inc.(a) 125,000 4,031,250
-------------------------------------------------------------------------------
FEI Co.(a) 220,000 3,363,800
-------------------------------------------------------------------------------
Mykrolis Corp.(a) 600,000 4,380,000
-------------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 200,000 4,752,200
===============================================================================
24,363,200
===============================================================================
SEMICONDUCTORS-4.22%
Actel Corp.(a) 275,000 4,460,500
-------------------------------------------------------------------------------
ChipPAC, Inc.-Class A(a) 786,500 2,792,075
-------------------------------------------------------------------------------
Cree, Inc.(a) 325,000 5,313,750
-------------------------------------------------------------------------------
Exar Corp.(a) 225,000 2,790,000
-------------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 300,000 5,475,000
-------------------------------------------------------------------------------
Intersil Corp.-Class A(a) 186,000 2,592,840
-------------------------------------------------------------------------------
NVIDIA Corp.(a) 175,000 2,014,250
-------------------------------------------------------------------------------
O2Micro International Ltd. (Cayman
Islands)(a) 300,000 2,924,700
-------------------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 200,000 2,714,000
-------------------------------------------------------------------------------
Pixelworks, Inc.(a) 300,000 1,740,000
-------------------------------------------------------------------------------
Semtech Corp.(a) 300,000 3,276,000
-------------------------------------------------------------------------------
Silicon Storage Technology, Inc.(a) 400,000 1,616,000
-------------------------------------------------------------------------------
Zoran Corp.(a) 285,000 4,009,950
===============================================================================
41,719,065
===============================================================================
SPECIALTY CHEMICALS-0.53%
Cambrex Corp. 175,000 5,286,750
===============================================================================
|
FS-31
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
SPECIALTY STORES-2.38%
CarMax, Inc.(a) 275,000 $ 4,917,000
-------------------------------------------------------------------------------
Copart, Inc.(a) 270,000 3,196,800
-------------------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 175,000 2,642,500
-------------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 140,000 6,993,000
-------------------------------------------------------------------------------
Restoration Hardware, Inc.(a) 400,000 2,004,000
-------------------------------------------------------------------------------
Tractor Supply Co.(a) 100,000 3,760,000
===============================================================================
23,513,300
===============================================================================
STEEL-0.29%
Gibraltar Steel Corp. 150,000 2,856,000
===============================================================================
SYSTEMS SOFTWARE-1.38%
Network Associates, Inc.(a) 185,625 2,986,706
-------------------------------------------------------------------------------
Red Hat, Inc.(a) 700,000 4,137,000
-------------------------------------------------------------------------------
SafeNet, Inc.(a) 200,000 5,070,000
-------------------------------------------------------------------------------
SonicWALL, Inc.(a) 400,000 1,452,000
===============================================================================
13,645,706
===============================================================================
TELECOMMUNICATIONS EQUIPMENT-0.55%
Anaren Microwave, Inc.(a) 225,000 1,980,000
-------------------------------------------------------------------------------
UTStarcom, Inc.(a) 175,000 3,470,250
===============================================================================
5,450,250
===============================================================================
TRADING COMPANIES & DISTRIBUTORS-0.28%
Fastenal Co. 75,000 2,804,250
===============================================================================
Total Common Stocks & Other Equity
Interests (Cost $910,121,065) 866,004,191
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-0.18%
U.S. Treasury Bills-0.18%
1.18%, 03/20/03 (Cost $1,745,526)(b) $ 1,750,000(c) $ 1,745,526
===============================================================================
SHARES
MONEY MARKET FUNDS-10.98%
STIC Liquid Assets Portfolio(d) 54,326,016 54,326,016
-------------------------------------------------------------------------------
STIC Prime Portfolio(d) 54,326,016 54,326,016
===============================================================================
Total Money Market Funds (Cost
$108,652,032) 108,652,032
===============================================================================
TOTAL INVESTMENTS-98.71% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$1,020,518,623) 976,401,749
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-25.97%
STIC Liquid Assets Portfolio(d)(e) 128,448,619 128,448,619
-------------------------------------------------------------------------------
STIC Prime Portfolio(d)(e) 128,448,618 128,448,618
===============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $256,897,237) 256,897,237
===============================================================================
TOTAL INVESTMENTS-124.68% (Cost
$1,277,415,860) 1,233,298,986
===============================================================================
OTHER ASSETS LESS LIABILITIES-(24.68)% (244,161,875)
===============================================================================
NET ASSETS-100.00% $ 989,137,111
_______________________________________________________________________________
===============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-32
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$1,277,415,860)* $1,233,298,986
------------------------------------------------------------
Receivables for:
Variation margin 6,500
------------------------------------------------------------
Fund shares sold 20,458,893
------------------------------------------------------------
Dividends 233,050
------------------------------------------------------------
Investment for deferred compensation plan 5,790
------------------------------------------------------------
Other assets 83,456
============================================================
Total assets 1,254,086,675
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 2,559,418
------------------------------------------------------------
Fund shares reacquired 3,964,114
------------------------------------------------------------
Deferred compensation plan 5,790
------------------------------------------------------------
Collateral upon return of securities
loaned 256,897,237
------------------------------------------------------------
Accrued distribution fees 756,251
------------------------------------------------------------
Accrued transfer agent fees 534,157
------------------------------------------------------------
Accrued operating expenses 232,597
============================================================
Total liabilities 264,949,564
============================================================
Net assets applicable to shares outstanding $ 989,137,111
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 790,699,664
____________________________________________________________
============================================================
Class B $ 152,577,138
____________________________________________________________
============================================================
Class C $ 41,692,522
____________________________________________________________
============================================================
Class R $ 1,301,356
____________________________________________________________
============================================================
Institutional Class $ 2,866,431
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 42,804,444
____________________________________________________________
============================================================
Class B 8,725,547
____________________________________________________________
============================================================
Class C 2,385,814
____________________________________________________________
============================================================
Class R 70,578
____________________________________________________________
============================================================
Institutional Class 154,717
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 18.47
------------------------------------------------------------
Offering price per share:
(Net asset value of $18.47 divided by
94.50%) $ 19.54
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 17.49
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 17.48
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 18.44
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 18.53
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $252,803,712 were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax
of $5,040) $ 762,972
------------------------------------------------------------
Dividends from affiliated money market
funds 2,324,973
------------------------------------------------------------
Interest 29,622
------------------------------------------------------------
Security lending income 1,294,148
============================================================
Total investment income 4,411,715
============================================================
EXPENSES:
Advisory fees 7,192,423
------------------------------------------------------------
Administrative services fees 206,896
------------------------------------------------------------
Custodian fees 85,558
------------------------------------------------------------
Distribution fees -- Class A 2,671,094
------------------------------------------------------------
Distribution fees -- Class B 1,944,775
------------------------------------------------------------
Distribution fees -- Class C 516,983
------------------------------------------------------------
Distribution fees -- Class R 1,176
------------------------------------------------------------
Transfer agent fees 2,941,835
------------------------------------------------------------
Trustees' fees 13,987
------------------------------------------------------------
Other 496,970
============================================================
Total expenses 16,071,697
============================================================
Less: Fees waived and expenses reimbursed (635,458)
------------------------------------------------------------
Expenses paid indirectly (17,370)
============================================================
Net expenses 15,418,869
============================================================
Net investment income (loss) (11,007,154)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FUTURES CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (144,269,499)
------------------------------------------------------------
Futures contracts (2,552,554)
------------------------------------------------------------
Option contracts written 126,893
============================================================
(146,695,160)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (183,451,348)
------------------------------------------------------------
Futures contracts (935,035)
============================================================
(184,386,383)
============================================================
Net gain (loss) from investment securities,
futures contracts and option contracts (331,081,543)
============================================================
Net increase (decrease) in net assets
resulting from operations $(342,088,697)
____________________________________________________________
============================================================
|
See Notes to Financial Statements.
FS-33
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (11,007,154) $ (6,785,278)
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and option contracts (146,695,160) (66,665,383)
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, and futures contracts (184,386,383) (23,595,827)
============================================================================================
Net increase (decrease) in net assets resulting from
operations (342,088,697) (97,046,488)
============================================================================================
Distributions to shareholders from net realized gains:
Class A -- (737,984)
--------------------------------------------------------------------------------------------
Class B -- (243,755)
--------------------------------------------------------------------------------------------
Class C -- (51,933)
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A 365,751,498 174,077,937
--------------------------------------------------------------------------------------------
Class B 9,058,506 13,080,520
--------------------------------------------------------------------------------------------
Class C 13,385,434 10,328,231
--------------------------------------------------------------------------------------------
Class R 1,257,422 --
--------------------------------------------------------------------------------------------
Institutional Class 2,877,566 --
============================================================================================
Net increase in net assets 50,241,729 99,406,528
============================================================================================
NET ASSETS:
Beginning of year 938,895,382 839,488,854
============================================================================================
End of year $ 989,137,111 $938,895,382
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,261,666,001 $880,330,701
--------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (14,211) (2,183)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, futures contracts and option contracts (228,078,850) (81,383,690)
--------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and futures contracts (44,435,829) 139,950,554
============================================================================================
$ 989,137,111 $938,895,382
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-34
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund, (the "Fund") is a separate series of AIM Growth
Series (the "Trust"). The Trust is organized as a Delaware statutory trust and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of three
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund currently offers five different classes of shares:
Class A shares, Class B shares, Class C shares, Class R shares and Institutional
Class 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
("CDSC"). Under some circumstances, Class A and Class R shares are subject to
CDSC charges. Class R shares and Institutional Class shares are sold at net
asset value. Generally, Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. 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. Effective as of the close of
business on March 18, 2002, the Fund has been closed to new investors.
The Fund's investment objective is long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to
FS-35
shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks include the possibility of an illiquid market and that a change in value of the contracts may not correlate with changes in the value of the securities being hedged. Risks also include to varying degrees, the risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
F. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
G. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold.
H. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $23,725.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $206,896 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $1,012,887 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. During the Fund's closing to new investors, AIM Distributors has agreed to waive 0.10% of the Fund's average daily net assets of Class A distribution plan fees. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $2,059,361, $1,944,775, $516,983 and $1,176, respectively after plan fees waived by AIM Distributors of $611,733 for Class A shares.
FS-36
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $198,431 in front-end sales commissions from the sale of Class A shares and $20,785, $35, $33,061 and $0 for Class A, Class B, Class C shares and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $4,406 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $15,049 and reductions in custodian fees of $2,321 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $17,370.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $252,803,712 were on loan to brokers. The loans were secured by cash collateral of $256,897,237 received by the Fund and subsequently invested in affiliated money market funds as follows: $128,448,619 in STIC Liquid Assets Portfolio and $128,448,618 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $1,294,148 for securities lending.
NOTE 7--FUTURES CONTRACTS
On December 31, 2002, $872,000 principal amount of U.S. Treasury obligations were pledged as collateral to cover margin requirements for open futures contracts. Open futures contracts as of December 31, 2002 were as follows:
UNREALIZED
NO. OF MONTH/ MARKET APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
--------------------------------------------------------------------
Russell 2000
Index 65 Mar-03/Long $12,454,000 $(318,955)
____________________________________________________________________
====================================================================
|
NOTE 8--CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 2002 are summarized as follows:
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------
Beginning of year -- $ --
----------------------------------------------------------
Written 2,500 301,389
----------------------------------------------------------
Closed (625) (68,358)
----------------------------------------------------------
Exercised (1,174) (161,996)
----------------------------------------------------------
Expired (701) (71,035)
==========================================================
End of year -- $ --
__________________________________________________________
==========================================================
|
FS-37
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
--------------------------------------------------------------
Distributions paid from ordinary income $ -- $1,033,672
______________________________________________________________
==============================================================
|
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (47,505,723)
------------------------------------------------------------
Temporary book/tax differences (14,211)
------------------------------------------------------------
Capital loss carryforward (210,613,708)
------------------------------------------------------------
Post-October capital loss deferral (14,395,248)
------------------------------------------------------------
Shares of beneficial interest 1,261,666,001
============================================================
$ 989,137,111
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains/(losses) on certain futures contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
December 31, 2009 $ 68,295,841
----------------------------------------------------------
December 31, 2010 142,317,867
==========================================================
$210,613,708
__________________________________________________________
==========================================================
|
NOTE 10--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, 2002 was $579,359,352 and $195,523,350, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 133,601,115 ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (181,106,838) ============================================================ Net unrealized appreciation (depreciation) of investment securities $ (47,505,723) ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $1,280,804,709. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating losses on December 31, 2002, undistributed net investment income was increased by $10,995,126 and shares of beneficial interest decreased by $10,995,126. This reclassification had no effect on the net assets of the Fund.
FS-38
NOTE 12--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 31,251,216 $ 673,450,471 14,079,041 $ 339,333,818
-------------------------------------------------------------------------------------------------------------------------
Class B 2,742,366 62,377,993 2,180,576 50,242,136
-------------------------------------------------------------------------------------------------------------------------
Class C 1,431,329 32,124,408 851,777 19,751,706
-------------------------------------------------------------------------------------------------------------------------
Class R* 77,652 1,386,762 -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class** 168,960 3,138,624 -- --
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 30,868 776,744
-------------------------------------------------------------------------------------------------------------------------
Class B -- -- 9,645 226,413
-------------------------------------------------------------------------------------------------------------------------
Class C -- -- 2,003 47,155
=========================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 238,309 5,287,422 -- --
-------------------------------------------------------------------------------------------------------------------------
Class B (250,272) (5,287,422) -- --
=========================================================================================================================
Reacquired:
Class A (15,143,035) (312,986,395) (6,654,156) (166,032,625)
-------------------------------------------------------------------------------------------------------------------------
Class B (2,464,023) (48,032,065) (1,567,212) (37,388,029)
-------------------------------------------------------------------------------------------------------------------------
Class C (959,396) (18,738,974) (397,721) (9,470,630)
-------------------------------------------------------------------------------------------------------------------------
Class R* (7,074) (129,340) -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class** (14,243) (261,058) -- --
=========================================================================================================================
17,071,789 $ 392,330,426 8,534,821 $ 197,486,688
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-39
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.67 $ 29.81 $ 31.87 $ 17.03 $ 14.27
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.18)(a) (0.13) (0.09)(a) (0.19)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.01) (3.93) (0.12) 15.47 3.45
================================================================================================================================
Total from investment operations (7.20) (4.11) (0.25) 15.38 3.26
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 18.47 $ 25.67 $ 29.81 $ 31.87 $ 17.03
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.05)% (13.79)% (0.74)% 90.64% 23.15%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $790,700 $679,104 $566,458 $428,378 $24,737
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.35%(c) 1.31% 1.13% 1.54% 1.76%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.43%(c) 1.39% 1.23% 1.54% 2.20%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.91)%(c) (0.70)% (0.40)% (0.38)% (1.29)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average net assets of $763,169,831.
CLASS B
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.48 $ 28.64 $ 30.92 $ 16.64 $ 14.06
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.40) (0.24)(a) (0.29)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.07) 15.06 3.37
================================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 14.82 3.08
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 17.49 $ 24.48 $ 28.64 $ 30.92 $ 16.64
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.55)% (14.42)% (1.48)% 89.40% 22.22%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $152,577 $212,958 $231,293 $240,150 $26,448
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19% 2.40%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19% 2.85%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)% (1.96)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $194,477,505.
FS-40
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------
MAY 3, 1999
YEAR ENDED DECEMBER 31, (DATE SALES COMMENCED)
----------------------------------- TO DECEMBER 31,
2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.47 $ 28.63 $ 30.91 $ 19.03
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.39) (0.17)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.08) 12.59
=============================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 12.42
=============================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54)
=============================================================================================================================
Net asset value, end of period $ 17.48 $ 24.47 $ 28.63 $ 30.91
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return (28.57)% (14.43)% (1.48)% 65.56%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted)(b) $41,693 $46,833 $41,738 $40,530
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19%(d)
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19%(d)
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)%(d)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 22% 37% 62% 56%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $51,698,285.
(d) Annualized.
FS-41
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
----------------------
JUNE 3, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.64
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a)
======================================================================================
Net losses on securities (both realized and unrealized) (4.07)
======================================================================================
Total from investment operations (4.20)
======================================================================================
Net asset value, end of period $ 18.44
______________________________________________________________________________________
======================================================================================
Total return(b) (18.55)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,301
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.61%(c)
--------------------------------------------------------------------------------------
Without fee waivers 1.61%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (1.17)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $407,028.
FS-42
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
----------------------
MARCH 17, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.61
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------------
Net losses on securities (both realized and unrealized) (6.01)
======================================================================================
Total from investment operations (6.08)
======================================================================================
Net asset value, end of period $ 18.53
______________________________________________________________________________________
======================================================================================
Total return(b) (24.71)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,866
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.89%(c)
--------------------------------------------------------------------------------------
Without fee waivers 0.89%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (0.45)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $514,814.
FS-43
AIM BASIC VALUE FUND
AIM MID CAP CORE EQUITY FUND
AIM SMALL CAP GROWTH FUND
May 1, 2003
Prospectus
INSTITUTIONAL CLASSES
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE INSTITUTIONAL CLASS 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.
As of the end of business on March 18, 2002, AIM Small Cap Growth Fund was closed to new investors.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ AIM Basic Value Fund 1 AIM Mid Cap Core Equity Fund 1 AIM Small Cap Growth Fund 1 All Funds 2 PRINCIPAL RISKS OF INVESTING IN THE FUNDS 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 6 FEE TABLE AND EXPENSE EXAMPLE 7 ------------------------------------------------------ Fee Table 7 Expense Example 7 FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Managers 8 OTHER INFORMATION 9 ------------------------------------------------------ Dividends and Distributions 9 Suitability for Investors 9 Fund Closure 9 FINANCIAL HIGHLIGHTS 10 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Purchasing Shares A-1 Redeeming Shares A-2 Pricing of Shares A-2 Taxes A-2 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM Lifetime America, 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 Internet Connect, AIM Private Asset Management, AIM Private Asset Management and Design, AIM Stylized and/or Design, AIM Alternative Assets and Design, AIM Investments, AIM Investments and Design, myaim.com, The AIM College Savings Plan, AIM Solo 401(k) and Your goals. Our solutions. 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.
AIM BASIC VALUE FUND (BASIC VALUE)
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet this objective by investing, normally, at least 65% of its total assets in equity securities of U.S. issuers that have market capitalizations of greater than $500 million and that the portfolio managers believe to be undervalued in relation to long-term earning power or other factors.
The fund may also invest up to 35% of its total assets in equity securities of U.S. issuers that have market capitalizations of less than $500 million and in investment-grade non-convertible debt securities, U.S. government securities and high-quality money market instruments, all of which are issued by U.S. issuers.
In selecting investments, the portfolio managers seek to identify those companies whose prospects and growth potential are undervalued by investors and that provide the potential for attractive returns. The portfolio managers allocate investments among fixed-income securities based on their views as to the best values then available in the marketplace. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
AIM MID CAP CORE EQUITY FUND (MID CAP CORE EQUITY)
The fund's investment objective is long-term growth of capital. 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 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Midcap--Registered Trademark--Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark--Index. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. The companies in the Russell Midcap--Registered Trademark-- Index are considered representative of medium-sized companies.
In complying with the 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund may invest up to 20% of its assets in equity securities of companies in other market capitalization ranges. The fund may also invest up to 20% of its assets in investment-grade debt securities, U.S. government securities and high-quality money market instruments.
In selecting investments, the portfolio managers seek to identify those
companies that are, in their view, undervalued relative to current or projected
earnings, or the current market value of assets owned by the company. The
primary emphasis of the portfolio managers' search for undervalued equity
securities is in four categories: (1) out-of-favor cyclical growth companies;
(2) established growth companies that are undervalued compared to historical
relative valuation parameters; (3) companies where there is early but tangible
evidence of improving prospects which are not yet reflected in the value of the
companies' equity securities; and (4) companies whose equity securities are
selling at prices that do not yet reflect the current market value of their
assets. The portfolio managers consider whether to sell a particular security
when any of these factors materially changes.
AIM SMALL CAP GROWTH FUND (SMALL CAP GROWTH)
The fund's investment objective is long-term growth of capital. 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 80% of its assets in securities of small-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
The fund may also invest up to 20% of its assets in equity securities of issuers that have market capitalizations, at the time of purchase, outside of the range of market capitalizations of companies included in the Russell 2000--Registered Trademark-- Index, and in investment-grade non-convertible debt securities, U.S. government securities and high-quality money market instruments.
In selecting investments, the portfolio managers seek to identify those companies that have strong earnings momentum or demonstrate other potential for growth of capital. The portfolio managers anticipate that the fund, when fully invested, will generally be comprised of companies that are currently experiencing a greater than antici-
pated increase in earnings. The portfolio managers allocate investments among fixed-income securities based on their views as to the best values then available in the marketplace. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
ALL FUNDS
Each fund may also invest up to 25% of its total assets in foreign securities.
For cash management purposes, each of the funds may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. For risk management purposes, Mid Cap Core Equity may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of a fund are applied at the time of purchase.
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, each of the funds may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, a fund may not achieve its investment objective.
Mid Cap Core Equity may maintain a larger position in cash or cash equivalents, which could detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
ALL FUNDS
There is a risk that you could lose all or a portion of your investment in the funds. The value of your investment in a fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the funds is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
MID CAP CORE EQUITY
To the extent Mid Cap Core Equity holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
SMALL CAP GROWTH
The prices of equity securities can change in response to many factors (as discussed above).
This is especially true with respect to equity securities of smaller companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for a fund to sell securities at a desirable price.
Institutional Class shares of the funds commenced operations on March 15, 2002.
The bar charts and tables shown below provide an indication of the risks of investing in each of the funds. A fund's past performance (before and after taxes) is not necessarily an indication of its future performance. The returns shown are those of each fund's Class A shares, which are not offered in this prospectus. Institutional Class shares would have higher annual returns because, although the shares are invested in the same portfolio of securities, Institutional Class shares have lower expenses.
The following bar charts show changes in the performance of each fund's Class A shares from year to year. The bar charts do not reflect sales loads. If they did, the annual total returns shown would be lower. Institutional Class shares are not subject to front-end or back-end sales loads.
BASIC VALUE--CLASS A
(GRAPH)
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1996.................................................................. 15.12%
1997.................................................................. 27.23%
1998.................................................................. 7.02%
1999.................................................................. 32.04%
2000.................................................................. 20.25%
2001.................................................................. 0.13%
2002.................................................................. -23.14%
|
MID CAP CORE EQUITY--CLASS A
(GRAPH)
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1993.................................................................. 8.34%
1994.................................................................. 15.69%
1995.................................................................. 23.23%
1996.................................................................. 15.65%
1997.................................................................. 14.05%
1998.................................................................. -4.71%
1999.................................................................. 37.13%
2000.................................................................. 18.81%
2001.................................................................. 0.52%
2002.................................................................. -11.09%
|
SMALL CAP GROWTH--CLASS A(1)
(GRAPH)
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1996................................................................... 13.81%
1997................................................................... 16.22%
1998................................................................... 23.15%
1999................................................................... 90.64%
2000................................................................... -0.74%
2001................................................................... -13.79%
2002................................................................... -28.01%
|
(1) A significant portion of Small Cap Growth Fund's returns during certain periods prior to 2001 was attributable to its investments in IPOs. These investments had a magnified impact when the fund's asset base was relatively small. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return.
The Class A shares' year-to-date total return as of March 31, 2003, was -6.31%, -4.53% and -4.06% for AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund, respectively.
During the periods shown in the bar charts, the highest quarterly returns and the lowest quarterly returns of each fund's Class A shares were as follows:
HIGHEST QUARTERLY RETURN LOWEST QUARTERLY RETURN
FUND (QUARTER ENDED) (QUARTER ENDED)
-----------------------------------------------------------------------------------------------
Basic Value--Class A 21.10% (June 30, 1999) -20.82% (September 30, 2002)
Mid Cap Core Equity--Class A 28.40% (December 31, 1999) -25.00% (September 30, 1998)
Small Cap Growth--Class A 38.10% (December 31, 1999) -24.41% (September 30, 2001)
-----------------------------------------------------------------------------------------------
|
PERFORMANCE TABLE
The following performance table compares each fund's Class A shares performance to that of a broad-based securities market index, a style specific index and a peer group index. Each fund's performance reflects payment of sales loads. The indices do not reflect payment of fees, expenses or taxes.
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS 10 YEARS INCEPTION(1) DATE
--------------------------------------------------------------------------------------
BASIC VALUE--CLASS A 10/18/95
Return Before Taxes (27.37)% 4.33% -- 10.25%
Return After Taxes on
Distributions (27.37) 4.11 -- 9.62
Return After Taxes on
Distributions and
Sale of Fund Shares (16.81) 3.42 -- 8.27
S&P 500(2, 3) (22.09) (0.58) -- 7.64(15) 10/31/95(15)
Russell 1000--Registered
Trademark-- Index(4) (21.65) (0.58) -- 7.47(15) 10/31/95(15)
Russell 1000--Registered
Trademark-- Value
Index(5) (15.52) 1.16 -- 9.18(15) 10/31/95(15)
Lipper Large-Cap Value
Fund Index(6) (19.68) (0.39) -- 6.94(15) 10/31/95(15)
MID CAP CORE
EQUITY--CLASS A 06/09/87
Return Before Taxes (15.99) 5.57 10.32 --
Return After Taxes on
Distributions (16.00) 3.46 7.34 --
Return After Taxes on
Distributions and
Sale of Fund Shares (9.80) 3.65 7.11 --
S&P 500(2, 7) (22.09) (0.58) 9.34 --
Russell
Midcap--Registered
Trademark-- Index(8) (16.19) 2.19 9.92 --
Lipper Mid-Cap Core Fund
Index(9) (17.37) 2.90 9.28 --
SMALL CAP GROWTH--CLASS
A(10) 10/18/95
Return Before Taxes (31.96) 6.45 -- 9.04
Return After Taxes on
Distributions (31.96) 5.65 -- 7.95
Return After Taxes on
Distributions and
Sale of Fund Shares (19.62) 5.04 -- 7.05
S&P 500(2, 11) (22.09) (0.58) -- 7.64(15) 10/31/95(15)
Russell 2000--Registered
Trademark-- Index(12) (20.48) (1.36) -- 5.05(15) 10/31/95(15)
Russell 2000--Registered
Trademark-- Growth
Index(13) (30.26) (6.59) -- (0.66)(15) 10/31/95(15)
Lipper Small-Cap Growth
Fund Index(14) (27.63) (1.22) -- 3.74(15) 10/31/95(15)
--------------------------------------------------------------------------------------
|
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
(1) Since Inception performance is only provided for a class with less than ten calendar years of performance.
(2) 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. Each of Basic Value, Mid Cap Core Equity and Small Cap Growth has elected to use the S&P 500 as its broad based index rather than the Russell 1000--Registered Trademark-- Index, Russell Midcap--Registered Trademark-- Index and Russell 2000--Registered Trademark-- Index, respectively, because the S&P 500 is a more widely recognized gauge of U.S. stock market performance.
(3) The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Large-Cap Value Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(4) The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
(5) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with the lower price-to-book ratios and lower forecasted growth values.
(6) The Lipper Large-Cap Value Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Large-Cap Value category. These funds typically invest in stocks with market capitalizations greater than $5 billion at the time of purchase and have a below average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's 500 Index.
(7) The fund has also included the Russell Midcap--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Mid-Cap Core Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(8) The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies in the Russell 1000--Registered Trademark-- Index with the lowest market capitalization. These companies are considered representative of medium-sized companies.
(9) The Lipper Mid-Cap Core Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Mid-Cap Core category. These funds typically invest in stocks with market capitalizations between $1 and $5 billion at the time of purchase and have an average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's MidCap 400 Index.
(10) A significant portion of Small Cap Growth Fund's returns during certain periods prior to 2001 was attributable to its investments in IPOs. These investments had a magnified impact when the fund's asset base was relatively small. As the fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the fund's total return. For additional information regarding the impact of IPO investments on the fund's performance, please see the "Financial Highlights" section of this prospectus.
(11) The fund has also included the Russell 2000--Registered Trademark-- Growth Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Small-Cap Growth Fund Index (which may or may not include the fund) is included for comparison to a peer group.
(12) The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
(13) The Russell 2000--Registered Trademark-- Growth Index measures the performance of those Russell 2000--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values.
(14) The Lipper Small-Cap Growth Fund Index is an equally weighted representation of the 30 largest funds in the Lipper Small-Cap Growth category. These funds typically invest in stocks with market capitalizations below $1 billion at the time of purchase and have an above-average price-to-earnings ratio, price-to-book ratio, and a three year sales-per-share growth value, compared to the Standard & Poor's SmallCap 600 Index.
(15) The average annual total return given is since the date closest to the inception date of the Class A shares of each fund.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the funds:
SHAREHOLDER FEES
--------------------------------------------------------------------------------
MID CAP SMALL
(fees paid directly from BASIC CORE CAP
your investment) VALUE EQUITY GROWTH
--------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of
original purchase price
or redemption proceeds, whichever is less) None None None
--------------------------------------------------------------------------------
|
ANNUAL FUND OPERATING EXPENSES(1)
-----------------------------------------------------------------------------
MID CAP SMALL
(expenses that are deducted BASIC CORE CAP
from fund assets) VALUE EQUITY GROWTH
-----------------------------------------------------------------------------
Management Fees 0.67% 0.70% 0.71%
Distribution and/or Service (12b-1) Fees None None None
Other Expenses 0.14 0.12 0.18
Total Annual Fund Operating Expenses 0.81 0.82 0.89
-----------------------------------------------------------------------------
|
(1) There is no guarantee that actual expenses will be the same as those shown in the table.
You should also consider the effect of any account fees charged by the financial institution managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the fund's operating expenses remain the same. To the extent fees are waived and/or expenses are reimbursed, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Basic Value $83 $259 $450 $1,002
Mid Cap Core Equity 84 262 455 1,014
Small Cap Growth 91 284 493 1,096
--------------------------------------------------------------------------------
|
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the funds' operations and provides investment advisory services to the funds, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the funds.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 190 investment portfolios, including the funds, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2002, the advisor received compensation of 0.67%, 0.70% and 0.71%, respectively, of Basic Value's, Mid Cap Core Equity's and Small Cap Growth's average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual member(s) of the team who are primarily responsible for the management of each fund's portfolio are
BASIC VALUE
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1998. From 1994 to 1998, he was Vice President and portfolio manager for Van Kampen American Capital Asset Management, Inc.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was a full-time student. From 1993 to 1997, he worked as a CPA for Deloitte & Touche.
- Matthew W. Seinsheimer, Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1998. From 1995 to 1998, he was portfolio manager for American Indemnity Company.
- Michael J. Simon, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001. From 1996 to 2001, he was equity analyst and portfolio manager for Luther King Capital Management.
They are assisted by the Basic Value Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
MID CAP CORE EQUITY
- Ronald S. Sloan (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1998. From 1993 to 1998, he was President of Verissimo Research & Management, Inc.
- David W. Pointer, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999 he was a full-time student.
They are assisted by the Mid/Large Cap Core Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
SMALL CAP GROWTH
- Ryan E. Crane, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1994.
He is assisted by the Mid Cap Growth and Small Cap Growth Teams. More information on the fund's management team may be found on our website (http://www.aiminvestments.com).
DIVIDENDS AND DISTRIBUTIONS
Each of the funds expects that its distributions, if any, will consist primarily of capital gains.
DIVIDENDS
The funds generally declare and pay dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The funds generally distribute long-term and short-term capital gains, if any, annually.
SUITABILITY FOR INVESTORS
The Institutional Classes of the funds are intended for use by institutional investors. Shares of the Institutional Classes of the funds are available for banks and trust companies acting in a fiduciary or similar capacity, bank and trust company common and collective trust funds, banks and trust companies investing for their own account, entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities or government agencies), defined benefit plans, endowments, foundations and defined contribution plans offered pursuant to Sections 401, 457, 403(a), or 403(b) or (c) (defined contribution plans offered pursuant to Section 403(b) must be sponsored by a Section 501(c)(3) organization). For defined contribution plans for which the sponsor has combined defined contribution and defined benefit assets of at least $100 million there is no minimum initial investment requirement, otherwise the minimum initial investment requirement for defined contribution plans is $10 million. There is no minimum initial investment requirement for defined benefit plans; and the minimum initial investment requirement for all other investors for which the Institutional Classes of the funds are available is $1 million.
The Institutional Classes of the funds are designed to be convenient and economical vehicles in which institutions can invest in a portfolio of equity securities. An investment in the funds may relieve the institution of many of the investment and administrative burdens encountered when investing in equity securities directly. These include: selection and diversification of portfolio investments; surveying the market for the best price at which to buy and sell; valuation of portfolio securities; receipt, delivery and safekeeping of securities; and portfolio recordkeeping.
FUND CLOSURE (SMALL CAP GROWTH)
Due to the sometimes limited availability of common stocks of smaller companies that meet the investment criteria for the fund, the fund discontinued public sales of its shares to new investors on the close of business on March 18, 2002. Investors should note that the fund reserves the right to refuse any order that might disrupt the efficient management of the fund.
The following types of investors may continue to invest in the fund if they were invested in the fund on March 18, 2002 and remain invested in the fund after that date:
(i) Existing shareholders of the fund;
(ii) Existing shareholders of the fund who open other accounts in their name;
(iii) The following plans and programs:
- Retirement plans maintained pursuant to Section 401 of the Internal Revenue Code ("the Code");
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non-qualified deferred compensation plans maintained pursuant to Section 83 of the Code; and
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Future investments in the fund made by existing brokerage firm wrap programs are at the discretion of A I M Distributors, Inc. (the distributor). Please contact the distributor for approval.
The following types of investors may open new accounts in the fund, if approved by the distributor:
- Retirement plans maintained pursuant to Section 401 of the Code;
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non qualified deferred compensation plans maintained pursuant to Section 83 of the Code; and
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Such plans and programs that are considering the fund as an investment option should contact the distributor for approval.
During this closed period, the fund may impose different standards for additional investments.
The fund may resume sales of shares to other new investors at some future date if the Board of Trustees determines that it would be in the best interest of the shareholders.
The financial highlights tables are intended to help you understand each fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in each fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with each fund's financial statements, is included in the fund's annual report, which is available upon request.
BASIC VALUE --
INSTITUTIONAL CLASS
-------------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.63
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06(a)
---------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.74)
=================================================================================
Total from investment operations (7.68)
=================================================================================
Net asset value, end of period $ 21.95
_________________________________________________________________________________
=================================================================================
Total return(b) (25.92)%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,471
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets 0.81%(c)
=================================================================================
Ratio of net investment income to average net assets 0.35%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 30%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $494,705.
MID CAP CORE EQUITY --
INSTITUTIONAL/CLASS
----------------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.03
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)
------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.77)
====================================================================================
Total from investment operations (3.73)
====================================================================================
Less distributions from net realized gains (0.03)
====================================================================================
Net asset value, end of period $ 21.27
____________________________________________________________________________________
====================================================================================
Total return(b) (14.92)%
____________________________________________________________________________________
====================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,817
____________________________________________________________________________________
====================================================================================
Ratio of expenses to average net assets 0.82%(c)
====================================================================================
Ratio of net investment income to average net assets 0.21%(c)
____________________________________________________________________________________
====================================================================================
Portfolio turnover rate 38%
____________________________________________________________________________________
====================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $2,810,072.
SMALL CAP GROWTH --
INSTITUTIONAL CLASS
----------------------
MARCH 17, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.61
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------------
Net losses on securities (both realized and unrealized) (6.01)
======================================================================================
Total from investment operations (6.08)
======================================================================================
Net asset value, end of period $ 18.53
______________________________________________________________________________________
======================================================================================
Total return(b) (24.71)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,866
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.89%(c)
--------------------------------------------------------------------------------------
Without fee waivers 0.89%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (0.45)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $514,814.
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 Institutional Classes of the AIM Funds.
SHARES SOLD WITHOUT SALES CHARGES
You will not pay an initial or contingent deferred sales charge on purchases of any Institutional Class of shares.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund Institutional Class accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
----------------------------------------------------------------------------------------
Defined Benefit Plans or Platform Sponsors for Defined
Contribution Plans $ 0 no minimum
Banks acting in a fiduciary or similar capacity, Collective
and Common Trust Funds, Banks and Broker-Dealers acting for
their own account or Foundations and Endowments 1 million no minimum
Defined Contribution Plans (Corporate, Non-profit or
Governmental) 10 million no minimum
----------------------------------------------------------------------------------------
|
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below. Purchase orders will not be processed unless the account application and purchase payment are received in good order. In accordance with the USA PATRIOT Act, if you fail to provide all the required information requested in the current account application, your purchase order will not be processed.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
-------------------------------------------------------------------------------------------------------------------------
Through a Financial Consultant Contact your financial consultant. Same
The financial consultant should mail
your completed account application to
the transfer agent,
A I M Fund Services, Inc.,
P.O. Box 4497,
Houston, TX 77210-4497.
The financial consultant should call
the transfer agent at (800) 659-1005 to
receive a reference number.
Then, use the following wire
instructions:
Beneficiary Bank
ABA/Routing #: 113000609
Beneficiary Account Number: 00100366732
Beneficiary Account Name: A I M Fund
Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account as described above. Call the transfer agent at (800)
659-1005 and wire payment for your
purchase order in accordance with the
wire instructions noted above.
-------------------------------------------------------------------------------------------------------------------------
|
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in the same AIM Fund at net asset value. Unless you specify otherwise, your dividends and distributions will automatically be reinvested in the same AIM Fund.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. Your broker or financial consultant may charge service fees for handling redemption transactions.
Through a Financial Consultant Contact your financial consultant.
Redemption proceeds will be sent in accordance with the wire
instructions specified in the account application provided
to the transfer agent. The transfer agent must receive your
financial intermediary's call before the close of the
customary trading session of the New York Stock Exchange
(NYSE) on days the NYSE is open for business in order to
effect the redemption at the day's closing price.
By Telephone A person who has been authorized in the account application
to effect transactions may make redemptions by telephone.
You must call the transfer agent before the close of the
customary trading session of the NYSE on days the NYSE is
open for business in order to effect the redemption at that
day's closing price.
|
TIMING AND METHOD OF PAYMENT
We normally will send out redemption proceeds within one business day, and in any event no more than seven days, after we accept your request to redeem.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will transmit the amount of the redemption
proceeds 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.
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 Fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
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 may 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.
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 order. 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.
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.
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 funds 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 each fund's investments. Each 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 these funds, another fund in The AIM Family of Funds--Registered Trademark-- or your account, or wish to obtain free copies of a fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4497
Houston, TX 77210-4497
BY TELEPHONE: (800) 451-4246
ON THE INTERNET: You can send us a request
by e-mail or download
prospectuses, annual or
semiannual reports via
our website:
http://www.aiminvestments.com
--------------------------------------------------------
|
You also can review and obtain copies of a 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 publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com AGS-PRO-1
STATEMENT OF
ADDITIONAL INFORMATION
AIM GROWTH SERIES
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE INSTITUTIONAL CLASSES OF EACH PORTFOLIO (EACH A "FUND," COLLECTIVELY THE "FUNDS") OF AIM GROWTH SERIES LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE INSTITUTIONAL CLASSES OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF A PROSPECTUS FOR THE FUNDS LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
A I M FUND SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 451-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 2003, RELATES TO THE PROSPECTUS FOR THE INSTITUTIONAL CLASSES OF THE FOLLOWING FUNDS:
FUND DATED
---- -----
AIM BASIC VALUE FUND MAY 1, 2003
AIM MID CAP CORE EQUITY FUND MAY 1, 2003
AIM SMALL CAP GROWTH FUND MAY 1, 2003
|
AIM GROWTH SERIES
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION ABOUT THE TRUST.............................................................................. 1
Fund History............................................................................................ 1
Shares of Beneficial Interest........................................................................... 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS......................................................... 3
Classification.......................................................................................... 3
Investment Strategies and Risks......................................................................... 3
Equity Investments............................................................................. 5
Foreign Investments............................................................................ 6
Debt Investments for Equity Funds.............................................................. 8
Other Investments.............................................................................. 9
Investment Techniques.......................................................................... 9
Derivatives.................................................................................... 14
Additional Securities or Investment Techniques................................................. 20
Fund Policies........................................................................................... 20
Temporary Defensive Positions........................................................................... 22
Portfolio Turnover...................................................................................... 22
MANAGEMENT OF THE TRUST.......................................................................................... 22
Board of Trustees....................................................................................... 22
Management Information.................................................................................. 23
Trustee Ownership of Fund Shares............................................................... 24
Factors Considered in Approving the Investment Advisory Agreement.............................. 24
Compensation............................................................................................ 24
Retirement Plan For Trustees................................................................... 25
Deferred Compensation Agreements............................................................... 25
Purchases of Class A Shares of the Funds at Net Asset Value.................................... 25
Codes of Ethics......................................................................................... 26
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................. 26
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................... 26
Investment Advisor...................................................................................... 26
Service Agreements...................................................................................... 27
Other Service Providers................................................................................. 28
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................................................... 29
Brokerage Transactions.................................................................................. 29
Commissions............................................................................................. 29
Brokerage Selection..................................................................................... 29
Directed Brokerage (Research Services).................................................................. 30
Regular Brokers or Dealers.............................................................................. 30
Allocation of Portfolio Transactions.................................................................... 30
Allocation of Initial Public Offering ("IPO") Transactions.............................................. 31
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................................................... 32
Purchase and Redemption of Shares....................................................................... 32
Redemptions by the Funds................................................................................ 32
Offering Price.......................................................................................... 32
|
Redemption In Kind...................................................................................... 33
Backup Withholding...................................................................................... 34
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS......................................................................... 35
Dividends and Distributions............................................................................. 35
Tax Matters............................................................................................. 35
DISTRIBUTION OF SECURITIES....................................................................................... 42
Distributor............................................................................................. 42
CALCULATION OF PERFORMANCE DATA.................................................................................. 42
APPENDICES:
RATINGS OF DEBT SECURITIES...................................................................................... A-1
TRUSTEES AND OFFICERS........................................................................................... B-1
TRUSTEE COMPENSATION TABLE...................................................................................... C-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................................................. D-1
MANAGEMENT FEES................................................................................................. E-1
ADMINISTRATIVE SERVICES FEES ................................................................................... F-1
BROKERAGE COMMISSIONS .......................................................................................... G-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS................ H-1
PERFORMANCE DATA................................................................................................ I-1
FINANCIAL STATEMENTS............................................................................................. FS
|
GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Growth Series (the "Trust") is a Delaware statutory trust which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of three separate portfolios: AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund. This Statement of Additional Information relates solely to the Institutional Classes of AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund (each a "Fund" and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated May 15 , 2002, as amended (the "Trust Agreement"), the Board of Trustees is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust.
The Trust was originally organized on February 19, 1985, as a Massachusetts business trust. The Trust reorganized as a Delaware business trust on May 29, 1998. The following Funds were included in the reorganization: AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund. All historical financial and other information contained in this Statement of Additional Information for periods prior to May 29, 1998 relating to these Funds (or a class thereof) is that of the predecessor funds (or the corresponding class thereof) of GT Global Growth Series, the Trust predecessor. Effective June 5, 2000, AIM Basic Value Fund no longer invests all of its investable assets in the Value Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Value Portfolio. Effective September 11, 2000, AIM Small Cap Growth Fund no longer invests all of its investable assets in the Small Cap Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Small Cap Portfolio. Prior to September 8, 1998, AIM Basic Value Fund was known as AIM America Value Fund and AIM Small Cap Growth Fund was known as AIM Small Cap Equity Fund. Prior to July 1, 2002, AIM Mid Cap Core Equity Fund was known as AIM Mid Cap Equity Fund (which was known as AIM Mid Cap Growth Fund prior to September 8, 1998).
Effective as of the close of business on March 18, 2002, AIM Small Cap
Growth Fund has been closed to new investors. The following types of investors
may continue to invest in AIM Small Cap Growth Fund if they were invested in the
Fund on the date the Fund discontinued sales to new investors and remain
invested in the Fund: existing shareholders of the Fund; existing shareholders
of the Fund who open other accounts in their name; retirement plans maintained
pursuant to Section 401 of the Internal Revenue Code ("the Code"); retirement
plans maintained pursuant to Section 403 of the Code, to the extent they are
maintained by organizations established under Section 501(c)(3) of the Code;
retirement plans maintained pursuant to Section 457 of the Code; non-qualified
deferred compensation plans maintained pursuant to Section 83 of the Code; and
Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Future investments in the Fund made by existing brokerage firm wrap programs
will be at the discretion of A I M Distributors, Inc.("AIM Distributors"). The
following types of investors may open new accounts in AIM Small Cap Growth Fund,
if approved by AIM Distributors,: retirement plans maintained pursuant to
Section 401 of the Code; retirement plans maintained pursuant to Section 403 of
the Code, to the extent they are maintained by organizations established under
Section 501(c)(3) of the Code; retirement plans maintained pursuant to Section
457 of the Code; non-qualified deferred compensation plans maintained pursuant
to Section 83 of the Code; and Qualified Tuition Programs maintained pursuant to
Section 529 of the Code. Such plans and programs that are considering AIM Small
Cap Growth Fund as an investment option should contact AIM Distributors for
approval.
SHARES OF BENEFICIAL INTEREST
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.
The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund 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 Fund offers five separate classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class shares. This Statement of Additional Information relates solely to the Institutional Classes of the Funds.
Each class of shares represents interests in the same portfolio of investments. Differing sales charges and expenses 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.
Each share of a Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
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 shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, 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. 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 is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected 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 ("Disabling Conduct"). The Trust Agreement provides for indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. The Trust Agreement also authorizes the purchase of liability insurance on behalf of trustees and officers.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds is "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The table on the following pages identifies various securities and investment techniques used by AIM in managing The AIM Family of Funds(R). The table has been marked to indicate those securities and investment techniques that AIM may use to manage a Fund. A Fund may not use all of these techniques at any one time. A Fund's transactions in a particular security or use of a particular technique is subject to limitations imposed by a Fund's investment objective, policies and restrictions described in that Fund's Prospectus and/or this Statement of Additional Information, as well as federal securities laws. The Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy.
AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------
FUND
----
SECURITY/
INVESTMENT AIM BASIC VALUE AIM MID CAP CORE AIM SMALL CAP
TECHNIQUE FUND EQUITY FUND GROWTH FUND
----------------------------------------------------------------------------------------------
EQUITY INVESTMENTS
----------------------------------------------------------------------------------------------
Common Stock X X X
----------------------------------------------------------------------------------------------
Preferred Stock X X X
----------------------------------------------------------------------------------------------
Convertible Securities X X X
----------------------------------------------------------------------------------------------
Alternative Entity Securities X X X
----------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
----------------------------------------------------------------------------------------------
Foreign Securities X X X
----------------------------------------------------------------------------------------------
Foreign Government Obligations X
----------------------------------------------------------------------------------------------
Foreign Exchange Transactions X X X
----------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUNDS
----------------------------------------------------------------------------------------------
U.S. Government Obligations X X X
----------------------------------------------------------------------------------------------
Investment Grade Corporate Debt X X X
Obligations
----------------------------------------------------------------------------------------------
Liquid Assets X X X
----------------------------------------------------------------------------------------------
Junk Bonds
----------------------------------------------------------------------------------------------
OTHER INVESTMENTS
----------------------------------------------------------------------------------------------
REITs X X X
----------------------------------------------------------------------------------------------
Other Investment Companies X X X
----------------------------------------------------------------------------------------------
Defaulted Securities
----------------------------------------------------------------------------------------------
Municipal Forward Contracts
----------------------------------------------------------------------------------------------
Variable or Floating Rate
Instruments
----------------------------------------------------------------------------------------------
Indexed Securities
----------------------------------------------------------------------------------------------
Zero-Coupon and Pay-in-Kind
Securities
----------------------------------------------------------------------------------------------
Synthetic Municipal Instruments
----------------------------------------------------------------------------------------------
INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------
Delayed Delivery Transactions X X X
----------------------------------------------------------------------------------------------
When-Issued Securities X X X
----------------------------------------------------------------------------------------------
Short Sales X X X
----------------------------------------------------------------------------------------------
Margin Transactions
----------------------------------------------------------------------------------------------
Swap Agreements X X X
----------------------------------------------------------------------------------------------
Interfund Loans X X X
----------------------------------------------------------------------------------------------
|
AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------
FUND
----
SECURITY/
INVESTMENT AIM BASIC VALUE AIM MID CAP CORE AIM SMALL CAP
TECHNIQUE FUND EQUITY FUND GROWTH FUND
----------------------------------------------------------------------------------------------
Borrowing X X X
----------------------------------------------------------------------------------------------
Lending Portfolio Securities X X X
----------------------------------------------------------------------------------------------
Repurchase Agreements X X X
----------------------------------------------------------------------------------------------
Reverse Repurchase Agreements X X X
----------------------------------------------------------------------------------------------
Dollar Rolls X X X
----------------------------------------------------------------------------------------------
Illiquid Securities X X X
----------------------------------------------------------------------------------------------
Rule 144A Securities X X X
----------------------------------------------------------------------------------------------
Unseasoned Issuers
----------------------------------------------------------------------------------------------
Portfolio Transactions
----------------------------------------------------------------------------------------------
Sale of Money Market Securities
----------------------------------------------------------------------------------------------
Standby Commitments
----------------------------------------------------------------------------------------------
DERIVATIVES
----------------------------------------------------------------------------------------------
Equity-Linked Derivatives X X X
----------------------------------------------------------------------------------------------
Put Options X X X
----------------------------------------------------------------------------------------------
Call Options X X X
----------------------------------------------------------------------------------------------
Straddles X X X
----------------------------------------------------------------------------------------------
Warrants X X X
----------------------------------------------------------------------------------------------
Futures Contracts and Options X X X
on Futures Contracts
----------------------------------------------------------------------------------------------
Forward Currency Contracts X X X
----------------------------------------------------------------------------------------------
Cover X X X
----------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
----------------------------------------------------------------------------------------------
Commercial Bank Obligations X X X
----------------------------------------------------------------------------------------------
|
Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. 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.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by issuers outside the United States, and include securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary Receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations.
Each Fund may invest up to 25% of its total assets in foreign securities.
Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
On January 1, 1999, certain members of the European Economic and Monetary Union ("EMU"), established a common European currency known as the "euro" and each member's local currency became a denomination of the euro. Each participating country (currently, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain) has replaced its local currency with the euro effective January 1, 2002.
Risks of Developing Countries. The Funds may each invest up to 5% of their total assets in securities of companies located in developing countries. Investments in developing countries present risks greater than, and in addition to, those presented by investments 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 Funds. 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 or less diverse, 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.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing countries.
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments for Equity Funds
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its investment adviser may consider: (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate.
LIQUID ASSETS. For cash management purposes, the Funds may hold a portion of their assets in cash or cash equivalents, including shares of affiliated money market funds. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, bankers' acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments, participation interests in corporate loans, and municipal obligations).
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. 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 maintain an 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/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds (defined below), 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.
The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds: (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.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery agreements will not be used as a speculative or leveraging technique.
Investment in securities on a 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 delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid
assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement.
A Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, a Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued 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 sell another security in order to honor a when-issued commitment. 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 assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. A Fund is said to have a short position in the securities sold until it delivers the securities sold, at which time it receives the proceeds of the sale. A Fund will make a short sale, as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a security convertible into or exchangeable for such security, or when the Fund does not want to sell the security it owns, because it wishes to defer recognition of gain or loss for federal income tax purposes. In such case, any future losses in a Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount a Fund owns, either directly or indirectly, and, in the case where the Fund owns convertible securities, changes in the conversion premium. In determining the number of shares to be sold short against a Fund's position in a convertible security, the anticipated
fluctuation in the conversion premium is considered. A Fund may also make short sales to generate additional income from the investment of the cash proceeds of short sales.
A Fund will only make short sales "against the box," meaning that at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and in an amount equal to, the securities sold short. To secure its obligation to deliver the securities sold short, a Fund will segregate with its custodian an equal amount to the securities sold short or securities convertible into or exchangeable for such securities. A Fund may pledge no more than 10% of its total assets as collateral for short sales against the box.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions will not be considered the purchase of a security on margin.
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 include: (i) 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"; (ii) 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 (iii) 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 fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Most swap agreements entered into by a Fund would calculate the obligations 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 to 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."
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other AIM Funds and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund loans are outstanding, a Fund cannot make any additional investments. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of a Fund to lend its securities to other AIM Funds is subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other
reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated 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. Each Fund may lend portfolio securities to the extent of one-third of its total assets.
The Fund 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 any cash collateral. A Fund will not have the right to vote securities while they are being lent, but it can call a loan in anticipation of an important vote. Any cash collateral pursuant to these loans would be invested in short-term money market instruments or Affiliated Money Market Funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned increases and the collateral is not increased accordingly or in the event of default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during the Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, a Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days, and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A Fund may
employ reverse repurchase agreements (i) for temporary emergency purposes, such
as to meet unanticipated net redemptions so as to avoid liquidating other
portfolio securities during unfavorable market conditions; (ii) to cover
short-term cash requirements resulting from the timing of trade settlements; or
(iii) to take advantage of market situations where the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the transaction. At the time it enters into a reverse
repurchase agreement, a Fund will segregate liquid assets having a dollar value
equal to the repurchase price, and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which it is obligated to
repurchase the securities, or that the other party may default on its
obligation, so that the
Fund is delayed or prevented from completing the transaction. Reverse repurchase agreements are considered borrowings by a Fund under the 1940 Act.
DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage security to a financial institution such as a broker-dealer or a bank, with an agreement to repurchase a substantially similar (i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are purchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, a Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for a Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund"s use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Funds obligation to repurchase the securities. At the time the Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Fund typically enters into dollar roll transactions to enhance the Fund's return either on an income or total return basis or to manage pre-payment risk. Dollar rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A, and thus may or may not constitute illiquid securities.
Each Fund may invest up to 15% of its net assets in securities that are illiquid. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A
under the 1933 Act. This Rule permits certain qualified institutional buyers,
such as the Funds, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Board of Trustees, will consider whether securities purchased under Rule
144A are illiquid and thus subject to the Funds' restriction on investment in
illiquid securities. Determination of whether a Rule 144A security is liquid or
not is a question of fact. In making this determination AIM will consider the
trading markets for the specific security taking into account the unregistered
nature of a Rule 144A security. In addition, AIM could consider the (i)
frequency of trades and quotes; (ii) number of dealers and potential purchasers;
(iii) dealer undertakings to make a market; and (iv) nature of the security and
of market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). AIM will also
monitor the liquidity of Rule 144A securities and, if as a result of changed
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM
will review a Fund's holdings of illiquid securities to determine what, if any,
action is required to assure that such Fund complies with its restriction on
investment in illiquid securities. Investing in Rule 144A securities could
increase the amount of each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
Derivatives
The Funds may each invest in forward currency contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with each Fund's investments. The Funds may also invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities).
EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a securities portfolio designed to replicate the composition and performance of a particular index. Equity-Linked Derivatives are exchange traded. The performance results of Equity-Linked Derivatives will not replicate exactly the performance of the pertinent index due to transaction and other expenses, including fees to service providers, borne by the Equity-Linked Derivatives. 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 Optimised 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 and, therefore, a Fund may be subject to the same investment restrictions with Equity-Linked Derivatives as with other investment companies. See "Other Investment Companies."
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise
price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy, and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write
call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. The Fund, for hedging purposes, may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Fund's overall position. A 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.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward currency contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make
an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Fund's investment policies with respect to bank obligations, obligations of foreign branches of U.S. banks and of foreign banks are obligations of the issuing bank and may be general obligations of the parent bank. Such obligations, however, may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject the Funds to investment risks that are different in some respects from those of investments in obligations of domestic issuers. Although a Fund typically will acquire obligations issued and supported by the credit of U.S. or foreign banks having total assets at the time of purchase of $1 billion or more, this $1 billion figure is not an investment policy or restriction of any Fund. For the purposes of calculation with respect to the $1 billion figure, the assets of a bank will be deemed to include the assets of its U.S. and non-U.S. branches.
FUND POLICIES
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment restrictions, which may be changed only by a vote of such Fund's outstanding shares. Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or 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. Any investment restriction that involves a maximum or minimum percentage of securities or assets (other than with respect to borrowing) 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) 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.
(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.
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 AIM 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. They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other investment companies or their series portfolios that have AIM or an affiliate of AIM as an investment 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 or when any borrowings from an AIM Advised Fund are outstanding.
(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 an 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.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Mid Cap Core Equity Fund normally invests at least 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) AIM Small Cap Growth Fund normally invests at least 80% of its assets in securities of small-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes..
PORTFOLIO TURNOVER
The portfolio turnover rate for AIM Basic Value Fund increased significantly from the fiscal year ended December 31, 2001 to the fiscal year ended December 31, 2002. AIM Basic Value Fund experienced an increase in portfolio turnover during this period because increased market volatility created more opportunities for fund managers to purchase stocks at what they viewed as compelling valuations. This is consistent with the Fund's investment strategy. The portfolio turnover rate for AIM Basic Value Fund decreased significantly from the fiscal year ended December 31, 2000 to the fiscal year ended December 31, 2001. AIM Basic Value Fund experienced a decline in portfolio turnover during this period because the portfolio managers of the Fund continued to view portfolio holdings purchased in prior periods as good investments for the Fund, and significant cash inflows during the year allowed the portfolio managers of the Fund to make other portfolio adjustments without selling existing holdings.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The overall management of the business and affairs of the Funds and the Trust is vested in the 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 objective(s), restrictions and policies of the applicable Fund and to the general supervision of the 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. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust and their principal occupations during at least the last five years and certain other information concerning them are set forth in Appendix B.
The standing committees of the Board of Trustees are the Audit Committee, the Investments Committee, the Valuation Committee and the Committee on Directors/Trustees.
The members of the Audit Committee are Frank S. Bayley, Bruce L. Crockett, Albert R. Dowden (Vice Chair), Edward K. Dunn, Jr. (Chair), Jack M. Fields, Lewis F. Pennock, Louis S. Sklar, Dr. Prema Mathai-Davis and Ruth H. Quigley. The Audit Committee is responsible for: (i) the appointment, compensation and oversight of any independent auditors employed by the Fund (including resolution of disagreements between Fund management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; (ii) overseeing the financial reporting process of the Fund; (iii) monitoring the process and resulting financial statements prepared by Fund management to promote accuracy of financial reporting and asset valuation; and (iv) preapproving permissible non-audit services that are provided to the Fund by its independent auditors. During the fiscal year ended December 31, 2002, the Audit Committee held six meetings.
The members of the Investments Committee are Messrs. Bayley, Crockett, Dowden, Dunn, Fields, Pennock and Sklar (Chair), Carl Frischling, Dr. Mathai-Davis (Vice Chair) and Miss Quigley. 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. During the fiscal year ended December 31, 2002, the Investments Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn and Pennock
(Chair), and Miss Quigley (Vice Chair). The Valuation Committee is responsible
for: (i) periodically reviewing AIM's Procedures for Valuing Securities
("Procedures"), and making any recommendations to AIM with respect thereto; (ii)
reviewing proposed changes to the Procedures recommended by AIM from time to
time; (iii) periodically reviewing information provided by AIM regarding
industry developments in connection with valuation; (iv) periodically reviewing
information from AIM regarding fair value and liquidity determinations made
pursuant to the Procedures, and making recommendations to the full Board in
connection therewith (whether such information is provided only to the Committee
or to the Committee and the full Board simultaneously); and (v) if requested by
AIM, assisting AIM's internal valuation committee and/or the full Board in
resolving particular valuation anomalies. During the fiscal year ended December
31, 2002, the Valuation Committee held one meeting.
The members of the Committee on Directors/Trustees are Messrs. Bayley,
Crockett (Chair), Dowden, Dunn, Fields (Vice Chair), Pennock and Sklar, Dr.
Mathai-Davis and Miss Quigley. The Committee on Directors/Trustees is
responsible for: (i) nominating persons who are not interested persons of the
Fund for election or appointment (a) as additions to the Board, (b) to fill
vacancies which, from time to time, may occur in the Board and (c) for election
by shareholders of the Fund at meetings called for the election of trustees;
(ii) nominating persons who are not interested persons of the Fund for selection
as, members of each committee of the Board, including without limitation, the
Audit Committee, the Committee on Directors/Trustees, the Investments Committee
and the Valuation Committee, and to nominate persons for selection as chair and
vice chair of each such committee; (iii) reviewing from time to time the
compensation payable to the independent trustees and making recommendations to
the Board regarding compensation; (iv) reviewing and evaluating from time to
time the functioning of the Board and the various committees of the Board; (v)
selecting independent legal counsel to the independent trustees
and approving the compensation paid to independent legal counsel; and (vi) approving the compensation paid to independent counsel and other advisers, if any, to the Audit Committee of the Fund. During the fiscal year ended December 31, 2002, the Committee on Directors/Trustees held five meetings.
The Committee on Directors/Trustees 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 Committee on Directors/Trustees or the Board, as applicable, shall
make the final determination of persons to be nominated.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustee within the AIM Funds complex, is set forth in Appendix B.
Factors Considered in Approving the Investment Advisory Agreement
The advisory agreement with AIM was re-approved for each Fund by the Trust's Board at a meeting held on May 14-15, 2002. In evaluating the fairness and reasonableness of the advisory agreement, the Board of Trustees considered a variety of factors for each Fund, including: the requirements of each Fund for investment supervisory and administrative services; the quality of AIM's services, including a review of each Fund's investment performance and AIM's investment personnel; the size of the fees in relationship to the extent and quality of the investment advisory services rendered; fees charged to AIM's other clients; fees charged by competitive investment advisors; the size of the fees in light of services provided other than investment advisory services; the expenses borne by each Fund as a percentage of its assets and relationship to contractual limitations; any fee waivers (or payments of Fund expenses) by AIM; AIM's profitability; the benefits received by AIM from its relationship to each Fund, including soft dollar arrangements, and the extent to which each Fund shares in those benefits; the organizational capabilities and financial condition of AIM and conditions and trends prevailing in the economy, the securities markets and the mutual fund industry; and the historical relationship between each Fund and AIM.
In considering the above factors, the Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of each Fund may be invested in money market funds advised by AIM pursuant to the terms of an exemptive order. The Board found that each Fund may realize certain benefits upon investing cash balances in AIM advised money market funds, including a higher net return, increased liquidity, increased diversification or decreased transaction costs. The Board also found that each Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board further determined that the proposed securities lending program and related procedures with respect to each of the lending Funds is in the best interests of each lending Fund and its respective shareholders. The Board therefore concluded that the investment of cash collateral received in connection with the securities lending program in the money market funds according to the procedures is in the best interests of each lending Fund and its respective shareholders.
After consideration of these factors, the Board found that: (i) the services provided to each Fund and its shareholders were adequate; (ii) the agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the agreements would have been obtained through arm's length negotiations. The Board therefore concluded that each Fund's advisory agreement was in the best interests of such Fund and its shareholders and continued the agreement for an additional year.
COMPENSATION
Each trustee who is not affiliated with AIM 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. 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.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002 is found in Appendix C.
Retirement Plan For Trustees
The Trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM. The retirement plan includes a retirement policy as well as retirement benefits for the non-AIM-affiliated trustees.
The retirement policy permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the trustees may extend from time to time the retirement date of a trustee.
Annual retirement benefits are available to each non-AIM-affiliated
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a
predecessor fund) for a Covered Fund. The retirement benefits will equal 75% of
the trustee's annual retainer paid or accrued by any Covered Fund to such
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the trustee. The annual retirement benefits are
payable in quarterly installments for a number of years equal to the lesser of
(i) ten or (ii) the number of such trustee's credited years of service. A death
benefit is also available under the plan that provides a surviving spouse with a
quarterly installment of 50% of a deceased trustee's retirement benefits for the
same length of time that the trustee would have received based on his or her
service. A trustee must have attained the age of 65 (55 in the event of death or
disability) to receive any retirement benefit.
Deferred Compensation Agreements
Messrs. 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 have the option to 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 have the option to 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 up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. 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 retirement benefits commence under the Plan. The Board, in its sole discretion, also 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. 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.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase Class A shares of the Funds without paying an initial sales charge. AIM Distributors permits such purchases because there is a reduced sales effort involved in sales to such purchasers, thereby resulting in relatively low expenses of distribution.
CODES OF ETHICS
AIM, the Trust and AIM Distributors have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading. Personal trading, including personal trading involving securities that may be purchased or held by a Fund, is permitted by persons covered under the relevant Codes subject to certain restrictions; however those persons are generally required to pre-clear all security transactions with the Compliance Officer or his designee and to report all transactions on a regular basis.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix D. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 190 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, 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 is also responsible for furnishing to the Funds, at AIM'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.
The Master Investment Advisory Agreement provides that the Fund will pay or cause to be paid all expenses of such 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 trustee 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.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its advisory agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the following annual rates, based on the average daily net assets of each Fund during the year:
---------------------------------------------------------------------------------
FUND NAME NET ASSETS ANNUAL RATE
---------------------------------------------------------------------------------
AIM Basic Value Fund First $500 million 0.725%
AIM Mid Cap Core Equity Fund Next $500 million 0.70%
AIM Small Cap Growth Fund Next $500 million 0.675%
Amount over $1.5 billion 0.65%
---------------------------------------------------------------------------------
|
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 Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed, effective July 1, 2002, to waive a portion of advisory fees payable by each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's investment of uninvested cash in an Affiliated Money Market Fund. See "Investment Strategies and Risks - Other Investments - Other Investment Companies."
The management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended December 31, are found in Appendix E.
SECURITIES LENDING ARRANGEMENTS. If a Fund engages in securities
lending, AIM will provide the Fund investment advisory services and related
administrative services. The 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.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund
which are not required to be performed by AIM under the advisory agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board of Trustees. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three fiscal years ended December 31, are found in Appendix F.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. A I M Fund Services, Inc. ("AFS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.
The Transfer Agency and Service Agreement between the Trust and AFS provides that AFS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AFS will receive a per account fee plus out-of-pocket expenses to process orders for purchases, redemptions and exchanges of shares; prepare and transmit payments for dividends and distributions declared by the Funds; maintain shareholder accounts and provide shareholders with information regarding the Funds and their accounts. AFS 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.
It is anticipated that most investors will perform their own sub-accounting.
CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for retail purchases. The Bank of New York, 100 Church Street, New York, New York 10286, also serves as sub-custodian to facilitate cash management.
The Custodian is authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country; the Custodian is responsible for monitoring eligible foreign securities depositories.
Under its contract with the Trust, the Custodian maintains the portfolio securities of the Funds, administers the purchases and sales of portfolio securities, collects interest and dividends and other distributions made on the securities held in the portfolios of the Funds and performs other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets.
AUDITORS. The Funds' independent public accountants are responsible for auditing the financial statements of the Funds. The Board of Trustees has selected PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas, 77002, as the independent public accountants to audit the financial statements of the Funds.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
AIM makes 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 "Brokerage Selection" below.
Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected at either net prices without commissions, but which include compensation to the broker-dealer in the form of a mark up or mark down, or on an agency basis, which involves the payment of negotiated brokerage commissions to the broker-dealer, including electronic communication networks.
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.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended December 31 are found in Appendix G.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
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 AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to another AIM Fund or account (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of Directors/Trustees of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses.
BROKERAGE SELECTION
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)(1), 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-dealers may communicate such information electronically, orally, in written form or on computer software. Research services may also include the providing of electronic communications of trade information and the providing of custody services, as well as the providing of equipment used to communicate research information and 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.
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 other mutual funds advised by AIM or A I M Capital Management, Inc. (collectively, 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, consistent with obtaining best execution. AIM will not use a specific formula in connection with any of these considerations to determine the target levels.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended December 31, 2002 are found in Appendix H.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended December 31, 2002 is found in Appendix H.
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 results in transactions which 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. This procedure would apply to transactions in both equity and fixed income securities.
ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in IPOs. Purchases of IPOs by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. It shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO, and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular IPO by reviewing a number of factors, including suitability of the investment with the AIM Fund's or account's investment objective, policies and strategies, the liquidity of the AIM Fund or account if such investment is purchased, and whether the portfolio manager intends to hold the security as a long-term investment. The allocation of securities issued in IPOs will be made to eligible AIM Funds and accounts in a manner designed to be fair and equitable for the eligible AIM Funds and accounts, and so that there is equal allocation of IPOs over the longer term. Where multiple funds or accounts are eligible, rotational participation may occur, based on the extent to which an AIM Fund or account has participated in previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund and account will be placed in one of four tiers, depending upon each AIM Fund's or account's asset level. The AIM Funds and accounts in the tier containing funds and accounts with the smallest asset levels will participate first, each receiving a 40 basis point allocation (rounded to the nearest share round lot that approximates 40 basis points) (the "Allocation"), based on that AIM Fund's or account's net assets. This process continues until all of the AIM Funds and accounts in the four tiers receive their Allocations, or until the shares are all allocated. Should securities remain after this process, eligible AIM Funds and accounts will receive their Allocations on a straight pro rata basis. In addition, Incubator Funds, as described in AIM's Incubator and New Fund Investment Policy, will each be limited to a 40 basis point allocation only. Such allocations will be allocated to the nearest share round lot that approximates 40 basis points.
When any AIM Funds and/or accounts with substantially identical investment objectives and policies participate in IPOs, they will do so in amounts that are substantially proportionate to each other. In these cases, the net assets of the largest participating AIM Fund will be used to determine in which tier, as described in the paragraph above, such group of AIM Funds or accounts will be placed. If no AIM Fund is participating, then the net assets of the largest account will be used to determine tier placement. The price per share of securities purchased in such IPO transactions will be the same for each AIM Fund and account.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE AND REDEMPTION OF SHARES
Before the initial purchase of shares, an investor must submit a completed account application to his financial intermediary, who should forward the application to A I M Fund Services, Inc. at P.O. Box 4497, Houston, Texas 77210-4497. An investor may change information in his account application by submitting written changes or a new account application to his intermediary or to AFS.
Purchase and redemption orders must be received in good order. To be in good order, the financial intermediary must give AFS all required information and documentation with respect to the investor. If the intermediary fails to deliver the investor's payment on the required settlement date, the intermediary must reimburse the Fund for any overdraft charges incurred.
A financial intermediary may submit a written request to AFS for correction of transactions involving Fund shares. If AFS agrees to correct a transaction, and the correction requires a dividend adjustment, the intermediary must agree in writing to reimburse the Fund for any resulting loss.
An investor may terminate his relationship with an intermediary and become the shareholder of record on his account. However, until the investor establishes a relationship with an intermediary, the investor will not be able to purchase additional shares of the Fund, except through the reinvestment of distributions.
Payment for redeemed shares is normally made by Federal Reserve wire to the bank account designated in the investor's account application, but may be sent by check at the investor's request. By providing written notice to his financial intermediary or to AFS, an investor may change the bank account designated to receive redemption proceeds. AFS may request additional documentation.
AFS may request that an intermediary maintain separate master accounts in the Fund for shares held by the intermediary (a) for its own account, for the account of other institutions and for accounts for which the intermediary acts as a fiduciary, and (b) for accounts for which the intermediary acts in some other capacity. An intermediary may aggregate its master accounts and subaccounts to satisfy the minimum investment requirement.
Platform sponsors that provide investment vehicles to fund Section 401 defined contribution plans and have entered into written agreements with AIM Distributors to waive applicable investment minimums may purchase Institutional Class shares for accounts within such plans.
REDEMPTIONS BY THE FUNDS
If the Funds determine that you have provided incorrect information in opening an account or in the course of conducting subsequent transactions, the Funds may, at their discretion, redeem the account and distribute the proceeds to you.
Additional information regarding purchases and redemptions is located in the Funds' prospectus, under the headings "Purchasing Shares" and "Redeeming Shares."
OFFERING PRICE
Shares of the Institutional Class of a Fund are sold at net asset value.
Calculation of Net Asset Value
Each Fund determines its net asset value per share 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, each Fund
determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, the Fund will generally use futures and options contract closing prices which are available fifteen (15) minutes after the close of the customary trading session of the NYSE. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles.
Each security (excluding convertible bonds) held by a Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued on the basis of prices furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the NASDAQ Official Closing Price ("NOCP") or absent a NOCP, 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 securities (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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data.
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 ask 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Foreign securities are converted into U.S. dollars using exchange rates as of the close of the NYSE. Generally, trading in foreign securities, corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of each Fund's shares are determined as of the close of the respective markets. Occasionally, events affecting the values of such securities may occur between the times at which such values 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 a development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as of the close of the applicable market, may be adjusted to reflect the fair value of the affected securities as of the close of the NYSE 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 cannot exchange or redeem shares of the Fund.
REDEMPTION IN KIND
AIM intends to redeem all shares of the Funds in cash. It is possible that future conditions may make it undesirable for a Fund to pay for redeemed shares in cash. In such cases, the Fund may make payment in securities or other property. If a Fund has made an election under Rule 18f-1 under the 1940 Act, the Fund is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets 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.
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, generally must withhold as of January 1, 2002, 30% 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; however, the backup withholding rate decreases in phases to 28% for distributions made in the year 2006 and thereafter.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
2. the IRS notifies the Fund that the investor furnished an incorrect TIN;
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);
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. AIM or AFS will not provide Form 1099 to those payees.
Investors should contact the IRS if they have any questions concerning withholding.
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 generally remains in effect for a period starting on the date the Form is signed and ending on the last day of the third succeeding calendar year. Such shareholders may, however, be subject to federal income tax withholding at a 30% rate on ordinary income dividends and other distributions. Under applicable treaty law, residents of treaty countries may qualify for a reduced rate of withholding or a withholding exemption.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and pay annually net investment income dividends and capital gain distributions. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gains by the end of each taxable year. In determining the amount of capital gains, if any, available for distribution, capital gains will be offset against available net capital loss, if any, carried forward from previous fiscal periods. All dividends and distributions will be automatically reinvested in additional shares of the same class of each Fund unless the shareholder has requested in writing to receive such dividends and distributions in cash or that they be invested in Institutional Class shares of another AIM Fund, subject to the terms and conditions set forth in the Prospectus under the caption "Special Plans - Automatic Dividend Investment". Such dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date. If a shareholder's account does not have any shares in it on a dividend or capital gain distribution payment date, the dividend or distribution will be paid in cash whether or not the shareholder has elected to have such dividends or distributions reinvested.
Distributions paid by a fund, other than daily dividends, have 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.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to be taxed under Subchapter M of the Code as a regulated investment company and intends to maintain its qualifications as such in each of its taxable years. 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 (i) at least 90% of its investment company taxable income (i.e., net investment income, net foreign currency ordinary gain or loss and the excess of net short-term capital gain over net long-term capital loss) and (ii) at least 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) 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 gain 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 gain to redemptions of Fund shares and will reduce the amount of such income and gain 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 gain 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.
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, 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 from its business of investing in such stock, securities or currencies (the "Income Requirement"). Under certain circumstances, a Fund may be required to sell portfolio holdings to meet this 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 (the "Asset Diversification Test"). 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 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 of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses.
For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such future contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test.
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. If a Fund purchases a debt obligation that was originally issued at a discount, the Fund is generally required to include in gross income each year
the portion of the original issue discount which accrues during such year. In addition, under the rules of Code Section 988, gain or loss recognized on the disposition of a debt obligation denominated in a foreign currency or an option with respect thereto (but only to the extent attributable to changes in foreign currency exchange rates), and gain or loss recognized on the disposition of a foreign currency forward contract or of foreign currency itself, will generally be treated as ordinary income or loss.
Certain 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, a Fund will generally be deemed to have constructively sold such appreciated financial position and will recognize gain as if such position were sold, assigned, or otherwise terminated at its fair market value on the date of such constructive sale (and will take into account any gain for the taxable year which includes such date).
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 that a
Fund holds 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 and 40% short-term gain or loss.
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as
discussed above) generally treated as ordinary income or loss. If such a future
or option is held as an offsetting position and can be considered a straddle
under Section 1092 of the Code, such a straddle will constitute a mixed
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income or long-term capital gain may also differ from the book income of the Fund and may be increased or decreased as compared to a fund that did not engage in such transactions.
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 (excess of capital gains over capital losses) 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
(1) 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 (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (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 generally 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. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity securities and thus may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company 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.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition of income with respect to PFIC stock, as well as subject the Funds themselves to tax on certain income from PFIC stock. For these reasons 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 stock.
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 IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area. Certain requirements that must be met under the Code in order for a Fund to qualify as a regulated investment company may limit the extent to which the Fund will be able to engage in swap agreements.
FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all of its investment company taxable income for each taxable year. Such distributions will be taxable to shareholders as ordinary income and treated as dividends for federal income tax purposes, but they will qualify for the 70% dividends received deduction for corporations to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital gain (net long-term capital gain over net short-term capital loss) for each taxable year. Each Fund currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will be taxable to shareholders as long-term capital gain (currently taxable at a maximum rate of 20% for noncorporate shareholders) regardless of the length of time the shareholder has held his shares or whether such gain was recognized by the Fund prior to the date on which the shareholder acquired his shares. Conversely, if a Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carry forwards) at the 35% corporate tax rate. If a Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for its shares by an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year will qualify for the 70% dividends received deduction generally available to corporations (other than corporations, such as "S" corporations, which are not eligible for the deduction because of their special characteristics and other than for purposes of special taxes such as the accumulated earnings tax and the personal holding company tax) to the extent of the amount of qualifying dividends received by the Fund from domestic corporations for the taxable year. However, the alternative minimum tax applicable to corporations may reduce the value of the dividends received deduction.
Alternative minimum tax ("AMT") is imposed in addition to, but only to the extent it exceeds, the regular tax and is computed at a maximum rate of 28% for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount. The corporate dividends received deduction is not itself an item of tax preference that must be added back to taxable income or is otherwise disallowed in determining a corporation's AMTI. However, corporate shareholders will generally be required to take the full amount of any dividend received from the Fund into account (without a dividend received deduction) in determining their adjusted current earnings, which are used in computing an additional corporate preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings over its AMTI (determined without regard to this item and the AMTI net operating loss deduction)) that is includable in AMTI. However, certain small corporations are wholly exempt from the AMT.
Distributions by a Fund that do not constitute earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Fund will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Fund (or of another Fund). Shareholders receiving a distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the 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.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred if the shareholder purchases other shares of the Fund within 30 days before or after the sale or redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain or loss and will be long-term capital gain or loss if the shares were held for longer than one year. Currently, any long-term capital gain recognized by a non-corporate shareholder will be subject to tax at a maximum rate of 20%. However, any capital loss arising from the sale or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on such shares. Capital losses in any year are deductible only to the extent of capital gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
If a shareholder (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. The wash sale rules may also
limit the amount of loss that may be taken into account on disposition.
BACKUP WITHHOLDING. The Funds may be required to withhold as of January 1, 2002, 30% of distributions and/or redemption payments; however, this rate is reduced in phases to 28% for distributions made in the year 2006 and thereafter. For more information refer to "Purchase, Redemption and Pricing of Shares - Backup Withholding".
FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder"), depends on whether the income from a Fund is "effectively connected" with a U.S. trade or business carried on by such shareholder. If the income from a Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions (other than distributions of long-term capital gain) will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount of the distribution. Such a foreign shareholder would generally be exempt from U.S. federal income tax on gain realized on the redemption of shares of a Fund, capital gain dividends and amounts retained by a Fund that are designated as undistributed net capital gain.
If the income from a Fund is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends and any gains realized upon the sale or redemption of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, a Fund may be required to withhold U.S. federal income tax at a rate of 30% on distributions made on or after January 1, 2002 that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign shareholders may be subject to U.S. withholding tax at a rate of 30% on the income resulting from a Fund's election to treat any foreign income tax paid by it as paid by its shareholders, but may not be able to claim a credit or deduction with respect to the withholding tax for the foreign tax treated as having been paid by them.
Foreign persons who file a United States tax return to obtain a U.S. tax refund and who are not eligible to obtain a social security number must apply to the IRS for an individual taxpayer identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying instructions, please contact your tax advisor or the IRS.
Transfers by gift of shares of a Fund by a foreign shareholder who is a nonresident alien individual will not be subject to U.S. federal gift tax. An individual who, at the time of death, is a foreign shareholder will nevertheless be subject to U.S. federal estate tax with respect to shares at the graduated
rates applicable to U.S. citizens and residents, unless a treaty exception applies. In the absence of a treaty, there is a $13,000 statutory estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in a Fund, including the applicability of foreign tax.
FOREIGN INCOME TAX. Investment income received by each Fund from sources within foreign countries may be subject to foreign income tax withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Funds to a reduced rate of, or exemption from, tax on such income. It is impossible to determine the effective rate of foreign tax in advance since the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of each taxable year consists of the stock or securities of foreign corporations, the Fund may elect to "pass through" to the Fund's shareholders the amount of foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will be required (i) to include in gross income, even though not actually received, their respective pro-rata shares of the foreign income tax paid by the Fund that are attributable to any distributions they receive; and (ii) either to deduct their pro-rata share of foreign tax in computing their taxable income, or to use it (subject to various Code limitations) as a foreign tax credit against Federal income tax (but not both). No deduction for foreign tax may be claimed by a non-corporate shareholder who does not itemize deductions or who is subject to alternative minimum tax.
Unless certain requirements are met, a credit for foreign tax is subject to the limitation that it may not exceed the shareholder's U.S. tax (determined without regard to the availability of the credit) attributable to the shareholder's foreign source taxable income. In determining the source and character of distributions received from a Fund for this purpose, shareholders will be required to allocate Fund distributions according to the source of the income realized by the Fund. Each Fund's gain from the sale of stock and securities and certain currency fluctuation gain and loss will generally be treated as derived from U.S. sources. In addition, the limitation on the foreign tax credit is applied separately to foreign source "passive" income, such as dividend income. Individuals who have no more than $300 ($600 for married persons filing jointly) of creditable foreign tax included on Form 1099 and whose foreign source income is all "qualified passive income" may elect each year to be exempt from the foreign tax credit limitation and will be able to claim a foreign tax credit without filing Form 1116 with its corresponding requirement to report income and tax by country. Moreover, no foreign tax credit will be allowable to any shareholder who has not held his shares of the Fund for at least 16 days during the 30-day period beginning 15 days before the day such shares become ex-dividend with respect to any Fund distribution to which foreign income taxes are attributed (taking into account certain holding period reduction requirements of the Code). Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by a Fund.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income and capital gain dividends may differ from the rules for U.S. federal income taxation described above. 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. Shareholders are urged to consult their tax advisers as to the consequences of these and other state and local tax rules affecting investment in the Funds.
DISTRIBUTION OF SECURITIES
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through other broker-dealers with whom AIM Distributors has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds.
The Trust (on behalf of the Institutional Classes) or AIM Distributors may terminate the Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment.
AIM Distributors may, from time to time, at its expense pay a bonus or other consideration or incentive to dealers or banks. The total amount of such additional bonus payments or other consideration shall not exceed 0.10% of the public offering price of the shares sold or of average daily net assets of the Funds attributable to that particular dealer. 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. Any such bonus or incentive programs will not change the price paid by investors for the purchase of the applicable Fund's shares or the amount that any particular Fund will receive as proceeds from such sales. Dealers may not use sales of the Funds' shares to qualify for any incentives to the extent that such incentives may be prohibited by the laws of any state.
CALCULATION OF PERFORMANCE DATA
Although performance data may be useful to prospective investors when comparing a Fund's performance with other funds and other potential investments, investors should note that the methods of computing performance of other potential investments are not necessarily comparable to the methods employed by a Fund.
Average Annual Total Return Quotation
The standard formula for calculating average annual total return is as follows:
n P(1 + T) = ERV
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (assuming the
applicable maximum sales load is deducted at the
beginning of the one, five or ten year periods);
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the one, five or ten year
periods (or fractional portion of such period).
|
The average annual total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix I.
Total returns quoted in advertising reflect all aspects of a Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in the Fund's net asset value per
share over the period. Cumulative total return reflects the performance of a Fund over a stated period of time. Average annual total returns are calculated by determining the growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Each Fund's total return is calculated in accordance with a standardized formula for computation of annualized total return.
A Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical compounded annual rate of return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Because average annual returns tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its cumulative and average annual returns into income results and capital gains or losses.
Alternative Total Return Quotations
Standard total return quotes may be accompanied by total return figures calculated by alternative methods. For example, average annual total return may be calculated without assuming payment of the full sales load according to the following formula:
n P(1 + U) = ERV
Where P = a hypothetical initial payment of $1,000;
U = average annual total return assuming payment of
only a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period;
n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
|
Cumulative total return across a stated period may be calculated as follows:
P(1 + V) = ERV
Where P = a hypothetical initial payment of $1,000;
V = cumulative total return assuming payment of all of,
a stated portion of, or none of, the applicable
maximum sales load at the beginning of the stated
period; and
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
|
The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix I.
Average Annual Total Return (After Taxes on Distributions) Quotation
A Fund's average annual total return (after taxes on distributions) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on distributions, but not on redemption proceeds. Average annual total returns (after taxes on distributions) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions) is:
n P(1 + T) = ATV
D
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment
D made at the beginning of the one, five or ten year
periods (or since inception, if applicable) at the
end of the one, five or ten year periods (or since
inception, if applicable), after taxes on fund
distributions but not after taxes on redemption.
|
Standardized average annual total return (after taxes on distributions) for Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix I.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its
average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n P(1 + T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the one, five or ten year periods (or
since inception, if applicable) at the end of the one,
five or ten year periods (or since inception, if
applicable), after taxes on fund distributions and
redemption.
|
Standardized average annual total return (after taxes on distributions and redemption) for Institutional Class shares does not reflect a deduction of any sales charges since that class is sold and redeemed at net asset value.
The after-tax returns assume all distributions by a Fund, less the taxes due on such distributions, are reinvested at the price calculated as stated in the prospectus on the reinvestment dates during the period. Taxes due on a Fund's distributions are calculated by applying to each component of the distribution (e.g., ordinary income and long-term capital gain) the highest corresponding individual marginal federal income tax rates in effect on the reinvestment date. The taxable amount and tax character of each distribution is as specified by the Fund on the dividend declaration date, but reflects any subsequent recharacterizations of distributions. The effect of applicable tax credits, such as the foreign tax credit, are also taken into account. The calculations only reflect federal taxes, and thus do not reflect state and local taxes or the impact of the federal alternative minimum tax.
The ending values for each period assume a complete liquidation of all shares. The ending values for each period are determined by subtracting capital gains taxes resulting from the sale of Fund shares and adding the tax benefit from capital losses resulting from the sale of Fund shares. The capital gain or loss upon sale of Fund shares is calculated by subtracting the tax basis from the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are calculated using the highest federal individual capital gains tax rate for gains of the appropriate character (e.g., ordinary income or long-term) in effect on the date of the sale of Fund shares and in accordance with federal tax law applicable on that date. The calculations assume that a shareholder may deduct all capital losses in full.
The basis of shares acquired through the $1,000 initial investment are tracked separately from subsequent purchases through reinvested distributions. The basis for a reinvested distribution is the distribution net of taxes paid on the distribution. Tax basis is adjusted for any distributions representing returns of capital and for any other tax basis adjustments that would apply to an individual taxpayer.
The amount and character (i.e., short-term or long-term) of capital gain or loss upon sale of Fund shares is determined separately for shares acquired through the $1,000 initial investment and each subsequent purchase through reinvested distributions. The tax character is determined by the length of the measurement period in the case of the initial $1,000 investment and the length of the period between reinvestment and the end of the measurement period in the case of reinvested distributions.
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Institutional Class shares for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are found in Appendix I.
Performance Information
All advertisements for the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
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. 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.
Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities:
Advertising Age Barron's Best's Review Broker World Business Week Changing Times Christian Science Monitor Consumer Reports Economist FACS of the Week Financial Planning Financial Product News Financial Services Week Financial World Forbes Fortune Hartford Courant Inc. Institutional Investor Insurance Forum Insurance Week Investor's Business Daily Journal of the American Society of CLU & ChFC Kiplinger Letter Money Mutual Fund Forecaster Nation's Business New York Times Pension World Pensions & Investments Personal Investor Philadelphia Inquirer USA Today U.S. News & World Report Wall Street Journal Washington Post CNN CNBC PBS |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor
Donoghue's
Mutual Fund Values (Morningstar)
Stanger
Weisenberger
Lipper, Inc.
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Large-Cap Value Fund Index Lipper Multi-Cap Value Fund Index Lipper Mid-Cap Core Fund Index Lipper Small-Cap Growth Fund Index Russell 1000--Registered Trademark-- Index Russell 1000--Registered Trademark-- Value Index Russell 2000--Registered Trademark-- Growth Index Russell 2000--Registered Trademark-- Index Russell Midcap--Registered Trademark-- Index Standard & Poor's 500 Stock Index |
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds 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. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment 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; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds 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 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 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 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 rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Caa: Bonds 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 represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Bonds in the Aa group which Moody's believes possess the strongest investment attributes are designated by the symbol Aa1.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to B. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category.
MOODY'S DUAL RATINGS
In the case of securities with a demand feature, two ratings are assigned: one representing an evaluation of the degree of risk associated with scheduled principal and interest payments, and the other representing an evaluation of the degree of risk associated with the demand feature.
MOODY'S SHORT-TERM LOAN RATINGS
Moody's ratings for state and municipal short-term obligations will be designated Moody's Investment Grade or (MIG). Such ratings recognize the differences between short-term credit risk and long-term risk. Factors affecting the liquidity of the borrower and short-term cyclical elements are critical in short-term ratings, while other factors of major importance in bond risk, long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand feature variable rate demand obligation (VRDO). Such ratings will be designated as VMIG or, if the demand feature is not rated, as NR. Short-term ratings on issues with demand features are differentiated by the use of the VMIG symbol to reflect such characteristics as payment upon periodic demand rather than fixed maturity dates and payment relying on external liquidity. Additionally, investors should be alert to the fact that the source of payment may be limited to the external liquidity with no or limited legal recourse to the issuer in the event the demand is not met.
A VMIG rating may also be assigned to commercial paper programs. Such programs are characterized as having variable short-term maturities but having neither a variable rate nor demand feature.
Moody's short-term ratings are designated Moody's Investment Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG 4.
Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same.
MIG 1/VMIG 1: This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.
MIG 3/VMIG 3: This designation denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal
cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or related supported institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effects of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
Note: A Moody's commercial paper rating may also be assigned as an evaluation of the demand feature of a short-term or long-term security with a put option.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a 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-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the lowest degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or large exposure to adverse conditions.
S&P MUNICIPAL BOND RATINGS
An S&P municipal bond rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees.
The ratings are based, in varying degrees, on the following considerations: likelihood of default - capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
Note: Ratings within the AA and A major rating categories may be modified by the addition of a plus (+) sign or minus (-) sign to show relative standing.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access risks unique to notes. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely the issue will be treated as a note); and source of payment (the more the issue depends on the market for its refinancing, the more likely it is to be treated as a note).
Note rating symbols and definitions are as follows:
SP-1: Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B: Issues with this rating are regarded as having only speculative capacity for timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless it is believed that such payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an occurrence that is likely to result in a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may be raised or lowered. FitchAlert is relatively short-term, and should be resolved within 12 months.
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating change over the intermediate term. It is described as "Positive" or "Negative." The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings ("BB" to "C") represent Fitch's assessment of the likelihood of timely payment of principal and interest in accordance with the terms of obligation for bond issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an assessment of the ultimate recovery value through reorganization of liquidation.
The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer or possible recovery value in bankruptcy, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily identical credit quality since rating categories cannot fully reflect the differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "DDD," "DD," or "D" categories.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit issued by a commercial bank.
APPENDIX B
TRUSTEES AND OFFICERS
As of January 1, 2003
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 89 portfolios in the AIM Funds complex. Column two below includes length of time served with predecessor entities, if any.
-------------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER DIRECTORSHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
-------------------------------------------------------------------------------------------------------------------------
INTERESTED PERSON
-------------------------------------------------------------------------------------------------------------------------
Robert H. Graham(1)-- 1946 1998 Director and Chairman, A I M Management None
Trustee, Chairman and Group Inc. (financial services holding company);
President and Director and Vice Chairman, AMVESCAP
PLC (parent of AIM and a global investment
management firm)
Formerly: President and Chief Executive Officer,
A I M Management Group Inc.; Director,
Chairman and President, A I M Advisors, Inc.
(registered investment advisor); and Director and
Chairman, A I M Capital Management, Inc.
(registered investment advisor), A I M
Distributors, Inc. (registered broker dealer), A I M
Fund Services, Inc., (registered transfer agent),
and Fund Management Company (registered
broker dealer)
-------------------------------------------------------------------------------------------------------------------------
Mark H. Williamson(2)-- 1951 2003 Director, President and Chief Executive Officer, Director, Chairman,
Trustee and Executive Vice A I M Management Group Inc. (financial services President and Chief
President holding company); Director, Chairman and Executive Officer,
President, A I M Advisors, Inc. (registered INVESCO Bond Funds,
investment advisor); Director, A I M Capital Inc., INVESCO
Management, Inc. (registered investment Combination Stock &
advisor) and A I M Distributors, Inc. (registered Bond Funds, Inc.,
broker dealer), Director and Chairman, INVESCO Counselor
A I M Fund Services, Inc. (registered transfer Series Funds, Inc.,
agent), and Fund Management Company INVESCO Global &
(registered broker dealer); and Chief Executive International
Officer, AMVESCAP PLC - AIM Division (parent Funds, Inc.,
of AIM and a global investment management INVESCO Manager
firm) Series Funds, Inc.,
INVESCO Money
Formerly: Director, Chairman and Chief Market Funds, Inc.,
Executive Officer, INVESCO Funds Group, Inc.; INVESCO Sector
and Chief Executive Officer, AMVESCAP PLC - Funds, Inc.,
Managed Products INVESCO Stock
Funds, Inc.,
INVESCO
-------------------------------------------------------------------------------------------------------------------------
|
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust. Mr. Williamson became Executive Vice President of the Trust on March 4, 2003
-------------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER DIRECTORSHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
-------------------------------------------------------------------------------------------------------------------------
Treasurer's
Series Funds, Inc.
and INVESCO
Variable Investment
Funds, Inc.
-------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
-------------------------------------------------------------------------------------------------------------------------
Frank S. Bayley -- 1939 1998 Of Counsel, law firm of Baker & McKenzie Badgley Funds,
Trustee Inc. (registered
investment
company)
-------------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited
Trustee (technology consulting company) (insurance
company); and
Captaris, Inc.
(unified messaging
provider)
-------------------------------------------------------------------------------------------------------------------------
Albert R. Dowden -- 1941 2001 Director, Magellan Insurance Company; Member Cortland Trust, Inc.
Trustee of Advisory Board of Rotary Power International (registered
(designer, manufacturer, and seller of rotary investment
power engines); and Director, The Boss Group company)
(private equity group)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo; and
director of various affiliated Volvo companies
-------------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. -- 1935 2001 Formerly: Chairman, Mercantile Mortgage None
Trustee Corp.; President and Chief Operating Officer,
Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares Corp.
-------------------------------------------------------------------------------------------------------------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Century Administaff
Trustee Group, Inc. (government affairs company) and
Texana Timber LP
-------------------------------------------------------------------------------------------------------------------------
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust, Inc.
Trustee Frankel LLP (registered
investment
company)
-------------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis -- 1950 2001 Formerly: Chief Executive Officer, YWCA of the None
Trustee USA
-------------------------------------------------------------------------------------------------------------------------
|
-------------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER DIRECTORSHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
-------------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock -- 1942 2001 Partner, law firm of Pennock & Cooper None
Trustee
-------------------------------------------------------------------------------------------------------------------------
Ruth H. Quigley -- 1935 1998 Retired None
Trustee
-------------------------------------------------------------------------------------------------------------------------
Louis S. Sklar -- 1939 2001 Executive Vice President, Hines (real estate None
Trustee development company)
-------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
-------------------------------------------------------------------------------------------------------------------------
Gary T. Crum(3) -- 1947 1998 Director, Chairman and Director of Investments, N/A
Vice President A I M Capital Management, Inc.; Director and
Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President,
A I M Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC
Formerly: Chief Executive Officer and President,
A I M Capital Management, Inc.
-------------------------------------------------------------------------------------------------------------------------
Stuart W. Coco -- 1955 2002 Managing Director and Chief Research Officer - N/A
Vice President Fixed Income, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
-------------------------------------------------------------------------------------------------------------------------
Melville B. Cox -- 1943 1998 Vice President and Chief Compliance Officer, N/A
Vice President A I M Advisors, Inc. and A I M Capital
Management, Inc.; and Vice President, A I M
Fund Services, Inc.
-------------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen(3) -- 1940 2002 Vice President, A I M Advisors, Inc.; and N/A
Vice President President, Chief Executive Officer and Chief
Investment Officer, A I M Capital Management,
Inc.
-------------------------------------------------------------------------------------------------------------------------
Dana R. Sutton -- 1959 1998 Vice President and Fund Treasurer, A I M N/A
Vice President and Advisors, Inc.
Treasurer
-------------------------------------------------------------------------------------------------------------------------
|
(3) Information is current as of January 10, 2003
-------------------------------------------------------------------------------------------------------------------------
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER DIRECTORSHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
-------------------------------------------------------------------------------------------------------------------------
Nancy L. Martin(4) -- 1957 2003 Vice President, A I M Advisors, Inc.; and Vice N/A
Secretary President and General Counsel, A I M Capital
Management, Inc.
-------------------------------------------------------------------------------------------------------------------------
|
(4) Ms. Martin became secretary of the Trust on April 1, 2003.
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2002
------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT
DOLLAR RANGE OF EQUITY SECURITIES COMPANIES OVERSEEN BY TRUSTEE
NAME OF TRUSTEE PER FUND IN THE AIM FAMILY OF FUNDS(R)
------------------------------------------------------------------------------------------------------
Robert H. Graham Basic Value Over $100,000 Over $100,000
Mid Cap Core Equity Over $100,000
Small Cap Growth Over $100,000
------------------------------------------------------------------------------------------------------
Mark H. Williamson - 0 - $10,001 - $50,000
------------------------------------------------------------------------------------------------------
Frank S. Bayley - 0 - $10,001 - $50,000
------------------------------------------------------------------------------------------------------
Bruce L. Crockett -0- $1 - $10,000
------------------------------------------------------------------------------------------------------
Albert R. Dowden Basic Value $1 - $10,000 $50,001 - $100,000
Mid Cap Core Equity $1 - $10,000
------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. Basic Value $1 - $10,000 Over $100,000(5)
Mid Cap Core Equity $1 - $10,000
------------------------------------------------------------------------------------------------------
Jack M. Fields - 0 - Over $100,000(5)
------------------------------------------------------------------------------------------------------
Carl Frischling Basic Value Over $100,000 Over $100,000(5)
Mid Cap Core Equity Over $100,000
------------------------------------------------------------------------------------------------------
Prema Mathai-Davis - 0 - Over $100,000(5)
------------------------------------------------------------------------------------------------------
Lewis F. Pennock Mid Cap Core Equity $1 - $10,000 $50,001 - $100,000
------------------------------------------------------------------------------------------------------
Ruth H. Quigley -0- $1 -$10,000
------------------------------------------------------------------------------------------------------
Louis S. Sklar - 0 - Over $100,000(5)
------------------------------------------------------------------------------------------------------
|
(5) Includes the total amount of compensation deferred by the trustee at his or her election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the AIM Funds.
APPENDIX C
TRUSTEE COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2002:
======================================================================================================
RETIREMENT
AGGREGATE BENEFITS ESTIMATED TOTAL
COMPENSATION ACCRUED ANNUAL COMPENSATION
FROM THE BY ALL BENEFITS UPON FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) RETIREMENT(3) FUNDS(4)
-------------------------------------------------------------------------------------------------------
Frank S. Bayley $6,889 $142,800 $90,000 $150,000
-------------------------------------------------------------------------------------------------------
Bruce L. Crockett 6,845 50,132 90,000 149,000
-------------------------------------------------------------------------------------------------------
Albert R. Dowden 8,889 57,955 90,000 150,000
-------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 6,845 94,149 90,000 149,000
-------------------------------------------------------------------------------------------------------
Jack M. Fields 6,889 29,153 90,000 153,000
-------------------------------------------------------------------------------------------------------
Carl Frischling(5) 6,889 74,511 90,000 150,000
-------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 6,889 33,931 90,000 150,000
-------------------------------------------------------------------------------------------------------
Lewis F. Pennock 7,052 54,802 90,000 154,000
-------------------------------------------------------------------------------------------------------
Ruth H. Quigley 6,889 142,502 90,000 153,000
-------------------------------------------------------------------------------------------------------
Louis S. Sklar 7,008 78,500 90,000 153,000
=======================================================================================================
|
(1) The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended December 31, 2002, including earnings, was $29,385.
(2) During the fiscal year ended December 31, 2002, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $44,552.
(3) Amounts shown assume each trustee serves until his or her normal retirement date.
(4) All trustees currently serve as directors or trustees of seventeen registered investment companies advised by AIM.
(5) During the fiscal year ended December 31, 2002, the Trust paid $19,680 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm.
APPENDIX D
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of April 4, 2003.
AIM BASIC VALUE FUND
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Branch Banking & Trust
TTEE
FBO W E Stanley & Co
INC OMNIBUS Daily
Trading
300 E. Wendover Ave.
Greensboro, NC 27401-1229 -- -- -- 15.16% --
--------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co.
Inc.
Reinvestment Account
101 Montgomery St.
San Francisco, CA
94104-0000 5.46% -- -- -- --
--------------------------------------------------------------------------------------------------------------------
First Command Bank
Trust
Attn: Trust Department
P.O. Box 901075
Fort Worth, TX 76101-
2075 -- -- -- -- 15.15%
--------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
The Guardian Insurance
& Annuity Company Inc.
Separate Acct L
Attn: Equity Acctg 3518
3900 Burgess Place
Bethlehem, PA 18017-
9097 -- -- -- 9.29% --
------------------------------------------------------------------------------------------------------------------
Heritage Registration
Company
1900 NW Expressway
50 Penn Place Suite
R225
Oklahoma City, OK
73118-1802 -- -- -- -- 84.34%
------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund
Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246 7.05% 10.69% 20.26% -- --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO French Paper
Company Employees
Savings & Investment
Plan
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 10.62% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO The Office of the
Chapter 13 Trustee 401K
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 10.42% --
------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Mecklenburg
Neurological Associates
PA 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 5.86% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Synergex 401K
Plan
3300 Northeast
Expressway Suite 200
Atlanta, GA 30341-3941 -- -- -- 7.07% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO William J. Kamm
and Sons Inc 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 11.56% --
------------------------------------------------------------------------------------------------------------------
Smith Barney House
Account
Attn: Cindy Tempesta
333 West 34th Street
7th Floor
New York, NY 10001-
2402 -- 9.84% 5.69% -- --
------------------------------------------------------------------------------------------------------------------
|
AIM MID CAP CORE EQUITY FUND
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Capital Bank & Trust Co.
TTEE
FBO Reeves Brothers
Inc 401(k) Plan
C/O Plan
Premier/Fascorp
8515 E. Orchard Rd 2T2
Englewood, CO 80111-
5037 -- -- -- 5.07% --
------------------------------------------------------------------------------------------------------------------
Charles Schwab & Co.
Inc.
Reinvestment Account
1001 Montgomery Street
San Francisco, CA
94104-0000 5.10% -- -- -- --
------------------------------------------------------------------------------------------------------------------
Compass Bancshares
Inc
Employee Stock
Ownership Plan
Nationwide Trust Co.
TTEE
FBO Compass
Bancshares Inc.
P.O. Box 1412
Austin, TX 78767-1412 -- -- -- -- 15.76%
-----------------------------------------------------------------------------------------------------------------------
Counsel Trust Co.
FBO American Bulk
Commodities Retirement
Savings Plan
235 St. Charles Way
Suite 100
York, PA 17402-4643 -- -- -- 7.30% --
-----------------------------------------------------------------------------------------------------------------------
Frontier Trust Company
401K
FBO Ted Britt Ford 401K
P.O. Box 10699
Fargo, ND 58106-0699 -- -- -- 5.01% --
-----------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
The Guardian Insurance
& Annuity Company Inc.
Separate Acct L
Attn: Equity Acctg 3518
3900 Burgess Place
Bethlehem, PA 18017-
9097 -- -- -- 20.01% --
------------------------------------------------------------------------------------------------------------------
Heritage Registration
Company
1900 NW Expressway
Suite R225
Oklahoma City, OK
73118-1817 -- -- -- -- 12.08%
------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund
Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246 8.51% 7.18% 20.36% -- --
------------------------------------------------------------------------------------------------------------------
The Northern Trust Co.
FBO Northern Trust Tip-
DV
P.O. Box 92956
Chicago, IL 60675 -- -- -- -- 58.48%
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Olson International Ltd -- -- -- 9.13% --
401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529
------------------------------------------------------------------------------------------------------------------
Smith Barney
House Account
Attn: Cindy Tempesta
333 West 34th Street
7th Floor
NY, NY 10001-2402 -- -- 5.64% -- --
------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Stanton Trust Company
NA as Trustee for the
W.L. Hall Company
401K and Profit Sharing
Plan
3405 Annapolia Lane N.
Suite 100
Minneapolis, MN
55447-8769 -- -- -- 8.04% --
------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank MN
NA
FBO Pinnacle West
Capital EE Svgs
13508112
P.O. Box 1533
Minneapolis, MN
55480-1533 -- -- -- -- 9.18%
------------------------------------------------------------------------------------------------------------------
|
AIM SMALL CAP GROWTH FUND
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Branch Banking & Trust
TTEE
FBO W.E. Stanley & Co.
Inc. Omnibus Daily
Trading
300 E. Wendover Ave.
Greensboro, NC 27401-
1229 -- -- -- 42.84% --
------------------------------------------------------------------------------------------------------------------
The Bretzlaff Foundation
Inc.
Attn: Michael J.
Melarkey
165 W. Liberty St.
Suite 210
Reno, NV 89501-2902 -- -- -- -- 7.83%
------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Counsel Trust Co.
FBO American Bulk
Commodities Retirement
Savings Plan
235 St. Charles Way
Suite 100
York, PA 17402-4643 -- -- -- 9.35% --
------------------------------------------------------------------------------------------------------------------
Equator Technologies,
Inc.
401(k) Retirement Plan
12 West Boylstown
Street
West Boylstown, MA
01583-1710 -- -- -- 12.95% --
------------------------------------------------------------------------------------------------------------------
Hubco
Regions Financial Corp
P.O. Box 830688
Birmingham, AL 35283-
0688 -- -- -- -- 17.15%
------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers
Attn: Fund
Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246 12.67% 9.84% 17.54% -- --
------------------------------------------------------------------------------------------------------------------
New York Life Trust
Company
401(k) Clients Accounts
51 Madison Avenue,
Room 117A
New York, NY 10010-
0000 6.00% -- -- -- --
------------------------------------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
------------------------------------------------------------------------------------------------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust
Co. TTEE
RAB Holdings Inc
Retirement Savings Plan
One Investors Way
Attn: DC Plan Admin
Team (MS:N1D)
(650030)
Norwood, MA 02062-
1584 -- -- -- -- 44.56%
------------------------------------------------------------------------------------------------------------------
Putnam Fiduciary Trust
Co. TTEE
FBO Idaho Power
Company Employee
Savings Plan
Attn: DCPA Team
650562 MS N-3-6
One Investors Way
Norwood, MA 02062-
1584 -- -- -- -- 25.53%
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Burgmann Seals
America 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 8.27% --
------------------------------------------------------------------------------------------------------------------
Reliance Trust Company
Custodian
FBO Mecklenburg
Neurological Associates
PA 401K Plan
P.O. Box 48529
Atlanta, GA 30362-1529 -- -- -- 5.53% --
------------------------------------------------------------------------------------------------------------------
Smith Barney
House Account
Attn: Cindy Tempesta
333 West 34th Street
7th Floor
NY, NY 10001-2402 -- -- 5.07% -- --
------------------------------------------------------------------------------------------------------------------
|
MANAGEMENT OWNERSHIP
As of April 4, 2003, the trustees and officers as a group owned less than 1% of the shares outstanding of each class of any Fund.
APPENDIX E
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
--------------------------------------------------------------------------------------------------------------
FUND NAME 2002 2001
--------------------------------------------------------------------------------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID FEE PAYABLE FEE WAIVERS FEE PAID
--------------------------------------------------------------------------------------------------------------
AIM Basic Value
Fund $31,679,859 $ 39,803 $ 31,640,056 $16,948,293 $ 13,380 $ 16,934,913
--------------------------------------------------------------------------------------------------------------
AIM Mid Cap
Core Equity
Fund $ 9,735,227 $ 42,589 $ 9,692,638 $ 4,690,551 $ 8,143 $ 4,682,408
--------------------------------------------------------------------------------------------------------------
AIM Small Cap
Growth Fund $ 7,192,423 $ 23,725 $ 7,168,698 $ 5,262,338 $ 4,597 $ 5,257,741
--------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------
FUND NAME 2000
----------------------------------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAID
----------------------------------------------------------------
AIM Basic Value
Fund $ 2,733,163 $ 5,258 $ 2,727,905
----------------------------------------------------------------
AIM Mid Cap
Core Equity
Fund $ 2,947,272 0 $ 2,947,272
----------------------------------------------------------------
AIM Small Cap
Growth Fund $ 6,615,573 $ 2,913 $ 6,612,660
----------------------------------------------------------------
|
APPENDIX F
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended December 31:
-------------------------------------------------------
FUND NAME 2002 2001 2000
-------------------------------------------------------
AIM Basic Value Fund $486,863 $279,428 $ 95,398
-------------------------------------------------------
AIM Mid Cap Core
Equity Fund $274,931 $133,274 $101,673
-------------------------------------------------------
AIM Small Cap Growth
Fund $206,896 $134,512 $132,817
-------------------------------------------------------
|
APPENDIX G
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended December 31 were as follows:
FUND 2002 2001 2000(2)
---- ---- ---- ----
AIM Basic Value Fund(3) $7,413,401 $7,503,643 $1,312,544
AIM Mid Cap Core Equity Fund(4) 2,957,059 1,571,624 704,102
AIM Small Cap Growth Fund(5) 1,470,812 567,827 563,807
|
1 Disclosure regarding brokerage commissions is limited to commissions
paid on agency trades and designated as such on the trade confirm.
2 Prior to June 6, 2000 for AIM Basic Value Fund and prior to September
11, 2000 for AIM Small Cap Growth Fund, the brokerage fees were paid by
each fund's respective hub portfolio.
3 The variation in brokerage commissions paid by AIM Basic Value Fund for
the fiscal years ended December 31, 2002 and 2001, as compared to the
fiscal year ended December 31, 2000, was due to a significant increase
in asset levels that led to additional buying and selling of stocks.
4 The variation in brokerage commissions paid by AIM Mid Cap Core Equity
Fund for the fiscal year ended December 31, 2002, as compared to the
two prior fiscal years, was due to a significant increase in asset
levels that led to additional buying and selling of stocks.
5 The variation in brokerage commissions paid by AIM Small Cap Growth
Fund for the fiscal year ended December 31, 2002, as compared to the
two prior fiscal years, was due to a significant increase in asset
levels that led to additional buying and selling of stock.
|
APPENDIX H
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2002, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions Brokerage Commissions
---- ------------ ---------------------
AIM Basic Value Fund $554,597,359 $986,632
AIM Mid Cap Core Equity Fund 160,422,735 317,547
AIM Small Cap Growth Fund 83,244,535 187,981
|
During the last fiscal year ended December 31, 2002, AIM Basic Value Fund held securities issued by the following companies, which are "equal" brokers or dealers of the Fund:
Issuer Security Market Value
-----------------------------------------------------------
JP Morgan Chase & Co. Common Stock $ 113,184,000
-----------------------------------------------------------
Merrill Lynch & Co., Inc. Common Stock 109,371,900
-----------------------------------------------------------
Morgan Stanley Common Stock 98,602,400
-----------------------------------------------------------
|
APPENDIX I
PERFORMANCE DATA
AVERAGE ANNUAL TOTAL RETURNS
The average annual total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
-------------
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ----
AIM Basic Value Fund N/A N/A N/A N/A 03/15/02
AIM Mid Cap Core Equity Fund N/A N/A N/A N/A 03/15/02
AIM Small Cap Growth Fund N/A N/A N/A N/A 03/15/02
|
CUMULATIVE TOTAL RETURNS
The cumulative total returns for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
-------------
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ----
AIM Basic Value Fund N/A N/A N/A -25.92 03/15/02
AIM Mid Cap Core Equity Fund N/A N/A N/A -14.92 03/15/02
AIM Small Cap Growth Fund N/A N/A N/A -24.71 03/15/02
|
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
-------------
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ----
AIM Basic Value Fund N/A N/A N/A N/A 03/15/02
AIM Mid Cap Core Equity Fund N/A N/A N/A N/A 03/15/02
AIM Small Cap Growth Fund N/A N/A N/A N/A 03/15/02
|
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption) for each Fund, with respect to its Institutional Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended December 31 are as follows:
PERIODS ENDED
-------------
DECEMBER 31, 2002
-----------------
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------- ------ ------- -------- --------- ----
AIM Basic Value Fund N/A N/A N/A N/A 03/15/02
AIM Mid Cap Core Equity Fund N/A N/A N/A N/A 03/15/02
AIM Small Cap Growth Fund N/A N/A N/A N/A 03/15/02
|
FINANCIAL STATEMENTS
FS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Basic Value Fund:
In our opinion, the accompanying statement of assets and liabilities, schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Basic Value Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
===========================================================================
DOMESTIC COMMON STOCKS-85.34%
ADVERTISING-5.07%
Interpublic Group of Cos., Inc. (The) 6,922,700 $ 97,471,616
---------------------------------------------------------------------------
Omnicom Group Inc. 2,065,000 133,399,000
===========================================================================
230,870,616
===========================================================================
AEROSPACE & DEFENSE-1.07%
Honeywell International Inc. 2,025,000 48,600,000
===========================================================================
APPAREL RETAIL-3.09%
Gap, Inc. (The) 9,057,300 140,569,296
===========================================================================
BANKS-6.35%
Bank of America Corp. 1,476,799 102,740,906
---------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 3,910,000 93,683,600
---------------------------------------------------------------------------
Bank One Corp. 2,543,000 92,946,650
===========================================================================
289,371,156
===========================================================================
BUILDING PRODUCTS-4.17%
American Standard Cos. Inc.(a) 1,399,000 99,524,860
---------------------------------------------------------------------------
Masco Corp. 4,292,600 90,359,230
===========================================================================
189,884,090
===========================================================================
DATA PROCESSING SERVICES-4.43%
Ceridian Corp.(a) 5,946,300 85,745,646
---------------------------------------------------------------------------
First Data Corp. 3,276,000 116,003,160
===========================================================================
201,748,806
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.87%
Cendant Corp.(a) 4,745,000 49,727,600
---------------------------------------------------------------------------
H&R Block, Inc. 3,145,400 126,445,080
===========================================================================
176,172,680
===========================================================================
DIVERSIFIED FINANCIAL SERVICES-13.74%
Citigroup Inc. 3,444,597 121,215,368
---------------------------------------------------------------------------
Freddie Mac 2,100,400 124,028,620
---------------------------------------------------------------------------
J.P. Morgan Chase & Co. 4,716,000 113,184,000
---------------------------------------------------------------------------
Janus Capital Group Inc. 4,544,000 59,390,080
---------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,882,000 109,371,900
---------------------------------------------------------------------------
Morgan Stanley 2,470,000 98,602,400
===========================================================================
625,792,368
===========================================================================
ELECTRIC UTILITIES-1.08%
PG&E Corp.(a) 3,554,000 49,400,600
===========================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-2.23%
Waters Corp.(a) 4,670,000 101,712,600
===========================================================================
|
MARKET
SHARES VALUE
===========================================================================
EMPLOYMENT SERVICES-0.82%
Robert Half International Inc.(a) 2,310,300 $ 37,218,933
===========================================================================
ENVIRONMENTAL SERVICES-3.11%
Waste Management, Inc. 6,192,167 141,924,468
===========================================================================
FOOD RETAIL-3.58%
Kroger Co. (The)(a) 7,216,400 111,493,380
---------------------------------------------------------------------------
Safeway Inc.(a) 2,200,000 51,392,000
===========================================================================
162,885,380
===========================================================================
GENERAL MERCHANDISE STORES-1.80%
Target Corp. 2,740,600 82,218,000
===========================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-3.56%
IMS Health Inc. 5,535,900 88,574,400
---------------------------------------------------------------------------
McKesson Corp. 2,721,900 73,572,957
===========================================================================
162,147,357
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.58%
Starwood Hotels & Resorts Worldwide, Inc. 3,024,000 71,789,760
===========================================================================
INDUSTRIAL MACHINERY-1.63%
Parker-Hannifin Corp. 1,607,600 74,158,588
===========================================================================
LEISURE PRODUCTS-1.55%
Mattel, Inc. 3,686,460 70,595,709
===========================================================================
LIFE & HEALTH INSURANCE-1.22%
UnumProvident Corp. 3,163,300 55,484,282
===========================================================================
MANAGED HEALTH CARE-1.52%
UnitedHealth Group Inc. 827,200 69,071,200
===========================================================================
MOVIES & ENTERTAINMENT-1.76%
Walt Disney Co. (The) 4,910,000 80,082,100
===========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.53%
Duke Energy Corp. 3,575,000 69,855,500
===========================================================================
OIL & GAS DRILLING-4.98%
ENSCO International Inc. 4,491,000 132,259,950
---------------------------------------------------------------------------
Transocean Inc. 4,076,698 94,579,394
===========================================================================
226,839,344
===========================================================================
PHARMACEUTICALS-2.08%
Wyeth 2,540,000 94,996,000
===========================================================================
|
FS-2
MARKET
SHARES VALUE
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.43%
MGIC Investment Corp. 1,114,100 $ 46,012,330
---------------------------------------------------------------------------
Radian Group Inc. 1,747,396 64,915,761
===========================================================================
110,928,091
===========================================================================
SEMICONDUCTOR EQUIPMENT-3.22%
Applied Materials, Inc.(a) 5,105,000 66,518,150
---------------------------------------------------------------------------
Novellus Systems, Inc.(a) 2,849,000 79,999,920
===========================================================================
146,518,070
===========================================================================
SYSTEMS SOFTWARE-2.81%
Computer Associates International, Inc. 9,484,900 128,046,150
===========================================================================
TELECOMMUNICATIONS EQUIPMENT-1.06%
Motorola, Inc. 5,570,000 48,180,500
===========================================================================
Total Domestic Common Stocks (Cost
$4,510,937,818) 3,887,061,644
===========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-11.71%
BERMUDA-8.31%
Nabors Industries, Ltd. (Oil & Gas
Drilling)(a) 2,365,000 83,413,550
---------------------------------------------------------------------------
Tyco International Ltd. (Industrial
Conglomerates) 10,646,000 181,833,680
---------------------------------------------------------------------------
Weatherford International Ltd. (Oil & Gas
Equipment & Services)(a) 2,837,000 113,281,410
===========================================================================
378,528,640
===========================================================================
CAYMAN ISLANDS-2.37%
ACE Ltd. (Property & Casualty Insurance) 3,687,000 108,176,580
===========================================================================
|
MARKET
SHARES VALUE
===========================================================================
NETHERLANDS-1.03%
Koninklijke (Royal) Philips Electronics
N.V.-New York Shares (Consumer Electronics) 2,643,098 $ 46,729,973
===========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $707,004,899) 533,435,193
===========================================================================
MONEY MARKET FUNDS-3.94%
STIC Liquid Assets Portfolio(b) 89,779,169 89,779,169
---------------------------------------------------------------------------
STIC Prime Portfolio(b) 89,779,169 89,779,169
===========================================================================
Total Money Market Funds (Cost
$179,558,338) 179,558,338
===========================================================================
TOTAL INVESTMENTS-100.99% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$5,397,501,055) 4,600,055,175
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-5.08%
STIC Liquid Assets Portfolio(b)(c) 115,607,394 115,607,394
---------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 115,607,395 115,607,395
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $231,214,789) 231,214,789
===========================================================================
TOTAL INVESTMENTS-106.07% (Cost
$5,628,715,844) 4,831,269,964
===========================================================================
OTHER ASSETS LESS LIABILITIES-(6.07%) (276,340,698)
===========================================================================
NET ASSETS-100.00% $4,554,929,266
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$5,628,715,844)* $4,831,269,964
------------------------------------------------------------
Receivables for:
Investments sold 5,031,217
------------------------------------------------------------
Fund shares sold 19,848,562
------------------------------------------------------------
Dividends 6,793,524
------------------------------------------------------------
Investment for deferred compensation plan 23,645
------------------------------------------------------------
Other assets 153,084
============================================================
Total assets 4,863,119,996
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 50,761,427
------------------------------------------------------------
Fund shares reacquired 18,336,269
------------------------------------------------------------
Deferred compensation plan 23,645
------------------------------------------------------------
Collateral upon return of securities
loaned 231,214,789
------------------------------------------------------------
Accrued distribution fees 5,020,831
------------------------------------------------------------
Accrued transfer agent fees 2,287,253
------------------------------------------------------------
Accrued operating expenses 546,516
============================================================
Total liabilities 308,190,730
============================================================
Net assets applicable to shares
outstanding $4,554,929,266
____________________________________________________________
============================================================
NET ASSETS:
Class A $2,534,964,078
____________________________________________________________
============================================================
Class B $1,498,498,797
____________________________________________________________
============================================================
Class C $ 518,574,540
____________________________________________________________
============================================================
Class R $ 1,421,225
____________________________________________________________
============================================================
Institutional Class $ 1,470,626
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 115,987,981
____________________________________________________________
============================================================
Class B 71,668,879
____________________________________________________________
============================================================
Class C 24,804,890
____________________________________________________________
============================================================
Class R 65,077
____________________________________________________________
============================================================
Institutional Class 66,994
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.86
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.86 divided by
94.50%) $ 23.13
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 20.91
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 20.91
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.84
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 21.95
____________________________________________________________
============================================================
|
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax
of $199,616) $ 51,387,184
------------------------------------------------------------
Dividends from affiliated money market
funds 3,622,103
------------------------------------------------------------
Security lending income 271,120
============================================================
Total investment income 55,280,407
============================================================
EXPENSES:
Advisory fees 31,679,859
------------------------------------------------------------
Administrative services fees 486,863
------------------------------------------------------------
Custodian fees 329,909
------------------------------------------------------------
Distribution fees -- Class A 8,779,210
------------------------------------------------------------
Distribution fees -- Class B 16,608,838
------------------------------------------------------------
Distribution fees -- Class C 5,884,893
------------------------------------------------------------
Distribution fees -- Class R 1,647
------------------------------------------------------------
Transfer agent fees 12,513,944
------------------------------------------------------------
Transfer agent fees -- Institutional Class 333
------------------------------------------------------------
Trustees' fees 33,990
------------------------------------------------------------
Other 1,762,558
============================================================
Total expenses 78,082,044
============================================================
Less: Fees waived (39,803)
------------------------------------------------------------
Expenses paid indirectly (73,235)
============================================================
Net expenses 77,969,006
============================================================
Net investment income (loss) (22,688,599)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (224,532,143)
------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (1,119,642,589)
============================================================
Net gain (loss) from investment securities (1,344,174,732)
============================================================
Net increase (decrease) in net assets
resulting from operations $(1,366,863,331)
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $228,283,230 were on loan to brokers.
See Notes to Financial Statements.
FS-4
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
-----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,688,599) $ (9,594,809)
-----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (224,532,143) (231,405,003)
-----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (1,119,642,589) 216,112,590
===============================================================================================
Net increase (decrease) in net assets resulting from
operations (1,366,863,331) (24,887,222)
===============================================================================================
Distributions to shareholders from net investment income:
Class A -- (114,095)
-----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (1,004,440)
-----------------------------------------------------------------------------------------------
Class B -- (778,204)
-----------------------------------------------------------------------------------------------
Class C -- (290,032)
-----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,177,106,683 1,619,680,325
-----------------------------------------------------------------------------------------------
Class B 447,671,199 1,315,483,690
-----------------------------------------------------------------------------------------------
Class C 122,712,958 379,676,399
-----------------------------------------------------------------------------------------------
Class R 1,424,141 --
-----------------------------------------------------------------------------------------------
Institutional Class 1,422,881 --
===============================================================================================
Net increase in net assets 383,474,531 3,287,766,421
===============================================================================================
NET ASSETS:
Beginning of year 4,171,454,735 883,688,314
===============================================================================================
End of year $ 4,554,929,266 $4,171,454,735
_______________________________________________________________________________________________
===============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 5,811,813,680 $4,084,121,184
-----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (65,471) (22,238)
-----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and option contracts (459,373,063) (234,840,920)
-----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (797,445,880) 322,196,709
===============================================================================================
$ 4,554,929,266 $4,171,454,735
_______________________________________________________________________________________________
===============================================================================================
|
See Notes to Financial Statements.
FS-5
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class 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 ("CDSC"). Under some circumstances, Class A and Class R shares are subject to CDSC charges. Class R shares and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. 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 long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
FS-6
E. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
F. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has agreed to waive advisory fees payable by the Fund to AIM at the annual rate of 0.025% for each $5 billion increment in net assets over $5 billion, up to a maximum waiver of 0.175% on net assets in excess of $35 billion. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $39,803.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $486,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $5,522,212 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $8,779,210, $16,608,838, $5,884,893 and $1,647, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $1,521,182 in front-end sales commissions from the sale of Class A shares and $36,121, $5,523, $194,164, and $0 for Class A, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $10,466 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $72,605 and reductions in custodian fees of $630 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $73,235.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, the Fund did not borrow under the line of credit agreement. The funds
which are party to the
FS-7
line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee is allocated among the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $228,283,230 were on loan to brokers. The loans were secured by cash collateral of $231,214,789 received by the Fund and subsequently invested in affiliated money market funds as follows: $115,607,394 in STIC Liquid Assets Portfolio and $115,607,395 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $271,120 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
---------------------------------------------------------------
Distributions paid from:
Ordinary income $ -- $1,140,758
---------------------------------------------------------------
Long-term capital gain -- 1,046,013
===============================================================
$ -- $2,186,771
_______________________________________________________________
===============================================================
|
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (808,908,153)
------------------------------------------------------------
Temporary book/tax differences (65,471)
------------------------------------------------------------
Capital loss carryforward (435,212,033)
------------------------------------------------------------
Post-October capital loss deferral (12,698,757)
------------------------------------------------------------
Shares of beneficial interest 5,811,813,680
============================================================
$4,554,929,266
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
-------------------------------------------------------
December 31, 2009 $101,680,239
-------------------------------------------------------
December 31, 2010 333,531,794
=======================================================
$435,212,033
_______________________________________________________
=======================================================
|
NOTE 8--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, 2002 was $3,143,527,166 and $1,381,420,449, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 215,316,580 ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (1,024,224,733) ============================================================ Net unrealized appreciation (depreciation) of investment securities $ (808,908,153) ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $5,640,178,117. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating loss and other items on December 31, 2002, undistributed net investment income was increased by $22,645,366 and shares of beneficial interest decreased by $22,645,366. This reclassification had no effect on the net assets of the Fund.
FS-8
BASIC VALUE FUND
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 76,760,537 $1,974,256,884 70,490,380 $1,992,135,991
----------------------------------------------------------------------------------------------------------------------------
Class B 36,719,189 930,261,749 54,343,509 1,495,352,954
----------------------------------------------------------------------------------------------------------------------------
Class C 11,937,042 301,540,951 16,273,481 449,321,584
----------------------------------------------------------------------------------------------------------------------------
Class R* 81,501 1,780,171 -- --
----------------------------------------------------------------------------------------------------------------------------
Institutional Class** 72,939 1,565,277 -- --
============================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 38,557 1,063,809
----------------------------------------------------------------------------------------------------------------------------
Class B -- -- 27,343 726,712
----------------------------------------------------------------------------------------------------------------------------
Class C -- -- 10,073 267,758
============================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 1,123,932 28,176,777 -- --
----------------------------------------------------------------------------------------------------------------------------
Class B (1,169,041) (28,176,777) -- --
============================================================================================================================
Reacquired:
Class A (34,569,714) (825,326,978) (13,646,069) (373,519,475)
----------------------------------------------------------------------------------------------------------------------------
Class B (20,054,811) (454,413,773) (6,954,159) (180,595,976)
----------------------------------------------------------------------------------------------------------------------------
Class C (7,825,922) (178,827,993) (2,629,184) (69,912,943)
----------------------------------------------------------------------------------------------------------------------------
Class R* (16,424) (356,030) -- --
----------------------------------------------------------------------------------------------------------------------------
Institutional Class** (5,945) (142,396) -- --
============================================================================================================================
63,053,283 $1,750,337,862 117,953,931 $3,314,840,414
____________________________________________________________________________________________________________________________
============================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-9
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.44 $ 28.41 $ 23.84 $ 18.13 $17.25
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.02)(a) 0.06 0.05(a) 0.04
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.54) 0.06 4.74 5.75 1.16
================================================================================================================================
Total from investment operations (6.58) 0.04 4.80 5.80 1.20
================================================================================================================================
Less distributions:
Dividends from net investment income 0.00 0.00 (0.03) 0.00 0.00
--------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
================================================================================================================================
Total distributions 0.00 (0.01) (0.23) (0.09) (0.32)
================================================================================================================================
Net asset value, end of period $ 21.86 $ 28.44 $ 28.41 $ 23.84 $18.13
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (23.14)% 0.16% 20.20% 32.04% 7.02%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,534,964 $2,066,536 $448,668 $70,791 $9,074
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.33%(c) 1.30% 1.32% 1.69% 1.74%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.33%(c) 1.30% 1.32% 1.71% 2.11%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.17)%(c) (0.05)% 0.49% 0.23% 0.25%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $2,508,345,697.
CLASS B
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $ 17.79 $ 17.04
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.09)(a) (0.08)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 5.62 1.15
=================================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 5.53 1.07
=================================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09) (0.32)
=================================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $ 23.23 $ 17.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 31.13% 6.34%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,498,499 $1,538,292 $241,157 $55,785 $17,406
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34% 2.39%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36% 2.76%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 30% 20% 56% 63% 148%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $1,660,883,829.
FS-10
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.38 $ 27.54 $ 23.23 $21.07
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.20)(a) (0.19)(a) (0.02) (0.06)(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.27) 0.04 4.53 2.31
==========================================================================================================================
Total from investment operations (6.47) (0.15) 4.51 2.25
==========================================================================================================================
Less distributions from net realized gains 0.00 (0.01) (0.20) (0.09)
==========================================================================================================================
Net asset value, end of period $ 20.91 $ 27.38 $ 27.54 $23.23
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) (23.63)% (0.53)% 19.47% 10.72%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $518,575 $566,627 $193,863 $7,669
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.98%(c) 1.95% 1.97% 2.34%(d)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.98%(c) 1.95% 1.97% 2.36%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.82)%(c) (0.70)% (0.16)% (0.42)%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate 30% 20% 56% 63%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America, does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $588,489,280.
(d) Annualized.
FS-11
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
-----------------------------------------------------------------------------
Net asset value, beginning of period $ 27.54
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
-----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.65)
=============================================================================
Total from investment operations (5.70)
=============================================================================
Net asset value, end of period $ 21.84
_____________________________________________________________________________
=============================================================================
Total return(b) (20.70)%
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,421
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets 1.54%(c)
=============================================================================
Ratio of net investment income (loss) to average net assets (0.37)%(c)
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate 30%
_____________________________________________________________________________
=============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $569,759.
FS-12
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.63
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06(a)
---------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.74)
=================================================================================
Total from investment operations (7.68)
=================================================================================
Net asset value, end of period $ 21.95
_________________________________________________________________________________
=================================================================================
Total return(b) (25.92)%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,471
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets 0.81%(c)
=================================================================================
Ratio of net investment income to average net assets 0.35%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate 30%
_________________________________________________________________________________
=================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $494,705.
FS-13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Mid Cap Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Mid Cap Core Equity Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-14
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
----------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-81.75%
ADVERTISING-1.30%
Omnicom Group Inc. 350,000 $ 22,610,000
============================================================================
Aerospace & Defense-2.45%
Northrop Grumman Corp. 245,000 23,765,000
----------------------------------------------------------------------------
Raytheon Co. 615,000 18,911,250
============================================================================
42,676,250
============================================================================
APPLICATION SOFTWARE-1.27%
PeopleSoft, Inc.(a) 1,210,000 22,143,000
============================================================================
BANKS-0.92%
Marshall & Ilsley Corp. 300,000 8,214,000
----------------------------------------------------------------------------
TCF Financial Corp. 180,000 7,864,200
============================================================================
16,078,200
============================================================================
COMPUTER & ELECTRONICS RETAIL-1.41%
Best Buy Co., Inc.(a) 1,020,000 24,633,000
============================================================================
CONSTRUCTION MATERIALS-0.73%
Martin Marietta Materials, Inc. 415,000 12,723,900
============================================================================
DATA PROCESSING SERVICES-4.74%
Ceridian Corp.(a) 2,815,000 40,592,300
----------------------------------------------------------------------------
Certegy Inc.(a) 960,400 23,577,820
----------------------------------------------------------------------------
Convergys Corp.(a) 1,215,000 18,407,250
============================================================================
82,577,370
============================================================================
DIVERSIFIED CHEMICALS-0.95%
Engelhard Corp. 740,000 16,539,000
============================================================================
DIVERSIFIED FINANCIAL SERVICES-1.21%
Principal Financial Group, Inc. 700,000 21,091,000
============================================================================
ELECTRIC UTILITIES-2.43%
FPL Group, Inc. 117,500 7,065,275
----------------------------------------------------------------------------
Wisconsin Energy Corp. 1,400,000 35,280,000
============================================================================
42,345,275
============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.03%
Rockwell Automation, Inc. 870,000 18,017,700
============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-8.65%
Amphenol Corp.-Class A(a) 610,000 23,180,000
----------------------------------------------------------------------------
Diebold, Inc. 430,000 17,724,600
----------------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 655,000 20,999,300
----------------------------------------------------------------------------
Millipore Corp.(a) 450,000 15,300,000
----------------------------------------------------------------------------
Molex Inc.-Class A 658,125 13,090,106
----------------------------------------------------------------------------
Roper Industries, Inc. 580,000 21,228,000
----------------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 670,000 7,490,600
----------------------------------------------------------------------------
Waters Corp.(a) 1,455,000 31,689,900
============================================================================
150,702,506
============================================================================
|
MARKET
SHARES VALUE
----------------------------------------------------------------------------
ENVIRONMENTAL SERVICES-1.80%
Republic Services, Inc.(a) 1,490,000 $ 31,260,200
============================================================================
FOOD RETAIL-2.36%
Kroger Co. (The)(a) 1,500,000 23,175,000
----------------------------------------------------------------------------
Safeway Inc.(a) 770,000 17,987,200
============================================================================
41,162,200
============================================================================
FOOTWEAR-1.30%
NIKE, Inc.-Class B 507,900 22,586,313
============================================================================
FOREST PRODUCTS-0.83%
Louisiana-Pacific Corp.(a) 1,787,100 14,404,026
============================================================================
GENERAL MERCHANDISE STORES-1.97%
BJ's Wholesale Club, Inc.(a) 885,000 16,195,500
----------------------------------------------------------------------------
Family Dollar Stores, Inc. 582,000 18,164,220
============================================================================
34,359,720
============================================================================
HEALTH CARE DISTRIBUTORS & SERVICES-1.80%
IMS Health Inc. 1,960,000 31,360,000
============================================================================
HEALTH CARE EQUIPMENT-3.97%
Apogent Technologies Inc.(a) 1,675,000 34,840,000
----------------------------------------------------------------------------
Bard (C.R.), Inc. 290,000 16,820,000
----------------------------------------------------------------------------
Beckman Coulter, Inc. 590,000 17,416,800
============================================================================
69,076,800
============================================================================
HOME FURNISHINGS-1.34%
Mohawk Industries, Inc.(a) 410,420 23,373,419
============================================================================
HOUSEHOLD APPLIANCES-1.94%
Black & Decker Corp. (The) 390,000 16,727,100
----------------------------------------------------------------------------
Whirlpool Corp. 325,000 16,971,500
============================================================================
33,698,600
============================================================================
HOUSEHOLD PRODUCTS-1.25%
Dial Corp. (The) 1,072,100 21,838,677
============================================================================
HOUSEWARES & SPECIALTIES-0.64%
Fortune Brands, Inc. 240,000 11,162,400
============================================================================
INDUSTRIAL MACHINERY-6.57%
Dover Corp. 1,420,000 41,407,200
----------------------------------------------------------------------------
Flowserve Corp.(a) 840,000 12,423,600
----------------------------------------------------------------------------
ITT Industries, Inc. 165,000 10,013,850
----------------------------------------------------------------------------
Kennametal Inc. 370,000 12,757,600
----------------------------------------------------------------------------
Pentair, Inc. 540,000 18,657,000
----------------------------------------------------------------------------
SPX Corp.(a) 514,000 19,249,300
============================================================================
114,508,550
============================================================================
IT CONSULTING & SERVICES-1.01%
Affiliated Computer Services, Inc.-Class A(a) 335,000 17,637,750
============================================================================
Leisure Products-2.64%
Brunswick Corp. 1,750,000 34,755,000
----------------------------------------------------------------------------
|
FS-15
MARKET
SHARES VALUE
----------------------------------------------------------------------------
LEISURE PRODUCTS-(CONTINUED)
Mattel, Inc. 586,000 $ 11,221,900
============================================================================
45,976,900
============================================================================
METAL & GLASS CONTAINERS-1.03%
Pactiv Corp.(a) 820,000 17,925,200
============================================================================
OFFICE ELECTRONICS-0.86%
Zebra Technologies Corp.-Class A(a) 260,000 14,898,000
============================================================================
OFFICE SERVICES & SUPPLIES-1.47%
Herman Miller, Inc. 1,390,000 25,576,000
============================================================================
OIL & GAS DRILLING-0.71%
Noble Corp. (Cayman Islands)(a) 350,000 12,302,500
============================================================================
OIL & GAS EQUIPMENT & SERVICES-2.23%
BJ Services Co.(a) 420,000 13,570,200
----------------------------------------------------------------------------
Cooper Cameron Corp.(a) 265,000 13,202,300
----------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 300,000 11,979,000
============================================================================
38,751,500
============================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-1.11%
Valero Energy Corp. 525,000 19,393,500
============================================================================
Packaged Foods & Meats-1.00%
Campbell Soup Co. 740,000 17,367,800
============================================================================
PERSONAL PRODUCTS-1.27%
Avon Products, Inc. 410,000 22,086,700
============================================================================
PHARMACEUTICALS-1.88%
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 572,000 22,084,920
----------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 380,000 10,742,600
============================================================================
32,827,520
============================================================================
PROPERTY & CASUALTY INSURANCE-2.56%
ACE Ltd. (Cayman Islands) 805,000 23,618,700
----------------------------------------------------------------------------
MGIC Investment Corp. 319,300 13,187,090
----------------------------------------------------------------------------
XL Capital Ltd.-Class A (Cayman Islands) 100,000 7,725,000
============================================================================
44,530,790
============================================================================
RAILROADS-0.61%
Norfolk Southern Corp. 530,000 10,594,700
============================================================================
RESTAURANTS-1.90%
Jack in the Box Inc.(a) 857,800 14,831,362
----------------------------------------------------------------------------
Outback Steakhouse, Inc. 530,000 18,253,200
============================================================================
33,084,562
============================================================================
|
MARKET
SHARES VALUE
----------------------------------------------------------------------------
Semiconductor Equipment-0.79%
Novellus Systems, Inc.(a) 490,000 $ 13,759,200
============================================================================
SEMICONDUCTORS-1.63%
Microchip Technology Inc. 582,500 14,242,125
----------------------------------------------------------------------------
Xilinx, Inc.(a) 690,000 14,214,000
============================================================================
28,456,125
============================================================================
SPECIALTY CHEMICALS-0.96%
Rohm & Haas Co. 515,000 16,727,200
============================================================================
SPECIALTY STORES-0.71%
Barnes & Noble, Inc.(a) 685,000 12,377,950
============================================================================
SYSTEMS SOFTWARE-3.45%
BMC Software, Inc.(a) 970,000 16,596,700
----------------------------------------------------------------------------
Computer Associates International, Inc. 3,227,500 43,571,250
============================================================================
60,167,950
============================================================================
TELECOMMUNICATIONS EQUIPMENT-1.07%
Advanced Fibre Communications, Inc.(a) 1,115,000 18,598,200
============================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,490,279,051) 1,423,968,153
============================================================================
MONEY MARKET FUNDS-21.56%
STIC Liquid Assets Portfolio(b) 187,767,715 187,767,715
----------------------------------------------------------------------------
STIC Prime Portfolio(b) 187,767,716 187,767,716
============================================================================
Total Money Market Funds (Cost
$375,535,431) 375,535,431
============================================================================
TOTAL INVESTMENTS-103.31% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$1,865,814,482) 1,799,503,584
============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-7.34%
STIC Liquid Assets Portfolio(b)(c) 63,966,375 63,966,375
----------------------------------------------------------------------------
STIC Prime Portfolio(b)(c) 63,966,376 63,966,376
============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $127,932,751) 127,932,751
============================================================================
TOTAL INVESTMENTS-110.65% (Cost
$1,993,747,233) 1,927,436,335
============================================================================
OTHER ASSETS LESS LIABILITIES-(10.65%) (185,507,301)
============================================================================
NET ASSETS-100.00% $1,741,929,034
____________________________________________________________________________
============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund and the Fund are affiliated by having the same
investment advisor.
(c) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-16
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$1,993,747,233)* $1,927,436,335
------------------------------------------------------------
Receivables for:
Investments sold 3,897,633
------------------------------------------------------------
Fund shares sold 12,584,280
------------------------------------------------------------
Dividends 1,174,875
------------------------------------------------------------
Investment for deferred compensation plan 6,352
------------------------------------------------------------
Other assets 86,718
============================================================
Total assets 1,945,186,193
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 69,367,438
------------------------------------------------------------
Fund shares reacquired 3,388,328
------------------------------------------------------------
Deferred compensation plan 6,352
------------------------------------------------------------
Collateral upon return of securities
loaned 127,932,751
------------------------------------------------------------
Accrued distribution fees 1,655,777
------------------------------------------------------------
Accrued transfer agent fees 772,266
------------------------------------------------------------
Accrued operating expenses 134,247
============================================================
Total liabilities 203,257,159
============================================================
Net assets applicable to shares outstanding $1,741,929,034
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,072,673,267
____________________________________________________________
============================================================
Class B $ 500,166,316
____________________________________________________________
============================================================
Class C $ 161,486,733
____________________________________________________________
============================================================
Class R $ 2,785,524
____________________________________________________________
============================================================
Institutional Class $ 4,817,194
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 50,664,905
____________________________________________________________
============================================================
Class B 25,744,337
____________________________________________________________
============================================================
Class C 8,320,943
____________________________________________________________
============================================================
Class R 131,543
____________________________________________________________
============================================================
Institutional Class 226,441
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 21.17
------------------------------------------------------------
Offering price per share:
(Net asset value of $21.17 divided by
94.50%) $ 22.40
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 19.43
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 19.41
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 21.18
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 21.27
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $125,936,123 were on loan to brokers. Statement of Operations
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of
$19,656) $ 9,465,481
------------------------------------------------------------
Dividends from affiliated money market funds 4,507,221
------------------------------------------------------------
Interest 23,988
------------------------------------------------------------
Security lending income 207,786
============================================================
Total investment income 14,204,476
============================================================
EXPENSES:
Advisory fees 9,735,227
------------------------------------------------------------
Administrative services fees 274,931
------------------------------------------------------------
Custodian fees 72,067
------------------------------------------------------------
Distribution fees -- Class A 2,838,084
------------------------------------------------------------
Distribution fees -- Class B 4,506,502
------------------------------------------------------------
Distribution fees -- Class C 1,224,586
------------------------------------------------------------
Distribution fees -- Class R 2,428
------------------------------------------------------------
Transfer agent fees 4,231,264
------------------------------------------------------------
Trustees' fees 15,936
------------------------------------------------------------
Other 631,091
============================================================
Total expenses 23,532,116
============================================================
Less: Fees waived (42,589)
------------------------------------------------------------
Expenses paid indirectly (22,811)
============================================================
Net expenses 23,466,716
============================================================
Net investment income (loss) (9,262,240)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (22,288,653)
============================================================
Change in net unrealized appreciation
(depreciation) of investment securities (166,482,913)
============================================================
Net gain (loss) from investment securities (188,771,566)
============================================================
Net increase (decrease) in net assets
resulting from operations $(198,033,806)
____________________________________________________________
============================================================
|
See Notes to Financial Statements.
FS-17
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (9,262,240) $ (3,420,458)
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (22,288,653) 2,072,999
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (166,482,913) 2,353,011
============================================================================================
Net increase (decrease) in net assets resulting from
operations (198,033,806) 1,005,552
============================================================================================
Distributions to shareholders from net investment income:
Class A -- (296,068)
--------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (1,222,471) (5,805,537)
--------------------------------------------------------------------------------------------
Class B (638,804) (4,360,649)
--------------------------------------------------------------------------------------------
Class C (201,407) (866,613)
--------------------------------------------------------------------------------------------
Class R (2,622) --
--------------------------------------------------------------------------------------------
Institutional Class (5,457) --
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A 695,280,419 233,958,818
--------------------------------------------------------------------------------------------
Class B 234,195,517 129,312,140
--------------------------------------------------------------------------------------------
Class C 112,522,467 49,161,867
--------------------------------------------------------------------------------------------
Class R 2,780,637 --
--------------------------------------------------------------------------------------------
Institutional Class 5,267,651 --
============================================================================================
Net increase in net assets 849,942,124 402,109,510
============================================================================================
NET ASSETS:
Beginning of year 891,986,910 489,877,400
============================================================================================
End of year $1,741,929,034 $891,986,910
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,831,543,175 $790,745,950
--------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (18,142) (2,209)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (23,285,101) 1,071,154
--------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (66,310,898) 100,172,015
============================================================================================
$1,741,929,034 $891,986,910
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-18
Notes to Financial Statements
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Core Equity Fund, formerly Mid Cap Equity Fund, (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of three separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers five different classes of shares: Class A shares, Class B shares, Class C shares, Class R shares and Institutional Class 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 ("CDSC"). Under some circumstances, Class A and Class R shares are subject to CDSC charges. Class R shares and Institutional Class shares are sold at net asset value. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. 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 long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
FS-19
E. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $42,589.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $274,931 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $2,066,301 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $2,838,084, $4,506,502, $1,224,586 and $2,428, respectively.
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $804,255 in front-end sales commissions from the sale of Class A shares and $10,007, $5,858, $57,073 and $0 for Class A, Class B, Class C and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $4,808 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $21,728 and reductions in custodian fees of $1,083 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $22,811.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $125,936,123 were on loan to brokers. The loans were secured by cash collateral of $127,932,751 received by the Fund and subsequently invested in affiliated money market funds as follows: $63,966,375 in STIC Liquid
FS-20
Assets Portfolio and $63,966,376 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $207,786 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ -- $ 8,866,797
--------------------------------------------------------------
Long-term capital gain 2,070,761 2,462,070
==============================================================
$2,070,761 $11,328,867
______________________________________________________________
==============================================================
|
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (67,307,346)
------------------------------------------------------------
Temporary book/tax differences (18,142)
------------------------------------------------------------
Capital loss carryforward (20,731,654)
------------------------------------------------------------
Post-October capital loss deferral (1,556,999)
------------------------------------------------------------
Shares of beneficial interest 1,831,543,175
============================================================
$1,741,929,034
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
December 31, 2010 $20,731,654
__________________________________________________________
==========================================================
|
NOTE 8--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, 2002 was $1,326,677,586 and $431,849,397 respectively.
The amount of unrealized appreciation of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 76,091,115 ------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (143,398,461) ============================================================= Net unrealized appreciation (depreciation) of investment securities $ (67,307,346) _____________________________________________________________ ============================================================= Cost of investments for tax purposes is $1,994,743,681. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating losses and other items on December 31, 2002, undistributed net investment income was increased by $9,246,307, undistributed net realized gains increased by $3,159 and shares of beneficial interest decreased by $9,249,466. This reclassification had no effect on the net assets of the Fund.
FS-21
NOTE 10--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 41,067,783 $ 939,876,985 14,841,455 $ 353,924,188
--------------------------------------------------------------------------------------------------------------------------
Class B 17,990,585 384,974,124 9,689,738 214,751,567
--------------------------------------------------------------------------------------------------------------------------
Class C 6,877,437 145,718,898 2,868,456 63,101,217
--------------------------------------------------------------------------------------------------------------------------
Class R* 140,266 2,963,401 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** 263,499 6,068,412 -- --
==========================================================================================================================
Issued as reinvestment of dividends:
Class A 55,181 1,164,373 247,762 5,748,094
--------------------------------------------------------------------------------------------------------------------------
Class B 31,286 606,185 191,629 4,107,954
--------------------------------------------------------------------------------------------------------------------------
Class C 9,824 190,001 37,928 812,196
--------------------------------------------------------------------------------------------------------------------------
Class R* 124 2,622 -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** 257 5,457 -- --
==========================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 1,600,496 36,525,348 -- --
--------------------------------------------------------------------------------------------------------------------------
Class B (1,736,124) (36,525,348) -- --
==========================================================================================================================
Reacquired:
Class A (12,610,500) (282,286,287) (5,345,950) (125,713,464)
--------------------------------------------------------------------------------------------------------------------------
Class B (5,692,653) (114,859,444) (4,149,104) (89,547,381)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,660,523) (33,386,432) (683,809) (14,751,546)
--------------------------------------------------------------------------------------------------------------------------
Class R* (8,847) (185,386) -- --
--------------------------------------------------------------------------------------------------------------------------
Institutional Class** (37,315) (806,218) -- --
==========================================================================================================================
46,290,776 $1,050,046,691 17,698,105 $ 412,432,825
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-22
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.85 $ 24.04 $ 23.48 $ 18.97 $ 21.01
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.05)(a) 0.10(a) (0.01)(a) (0.24)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.56) 0.18 4.10 6.88 (0.81)
===============================================================================================================================
Total from investment operations (2.65) 0.13 4.20 6.87 (1.05)
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.02) -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.03) (0.30) (3.64) (2.36) (0.99)
===============================================================================================================================
Total distributions (0.03) (0.32) (3.64) (2.36) (0.99)
===============================================================================================================================
Net asset value, end of period $ 21.17 $ 23.85 $ 24.04 $ 23.48 $ 18.97
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) (11.13)% 0.56% 18.76% 37.13% (4.71)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,072,673 $490,118 $259,803 $178,550 $180,258
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.43%(c) 1.39% 1.37% 1.46% 1.56%(d)
===============================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.40)%(c) (0.22)% 0.38% (0.07)% (1.09)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average daily net assets of $810,880,938.
(d) Ratio includes waiver and expense reductions. Ratio of expense to
average net assets excluding waiver and expense reduction was 1.57%.
CLASS B
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.03 $ 22.36 $ 22.21 $ 18.16 $ 20.31
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.14)(a) (0.38)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) (2.35) 0.16 3.86 6.55 (0.78)
==============================================================================================================================
Total from investment operations (2.57) (0.03) 3.79 6.41 (1.16)
==============================================================================================================================
Less distributions from net realized gains (0.03) (0.30) (3.64) (2.36) (0.99)
==============================================================================================================================
Net asset value, end of period $ 19.43 $ 22.03 $ 22.36 $ 22.21 $ 18.16
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) (11.69)% (0.10)% 17.98% 36.25% (5.41)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $500,166 $333,783 $210,608 $151,392 $165,447
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets 2.08%(c) 2.05% 2.02% 2.11% 2.21%(d)
==============================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.05)%(c) (0.87)% (0.27)% (0.72)% (1.74)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate 38% 68% 72% 90% 168%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $450,650,215.
(d) Ratio includes waiver and expense reductions. Ratio of expense to
average net assets excluding waiver and expense reduction was 2.22%.
FS-23
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------
MAY 3, 1999
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------------- DECEMBER 31,
2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.00 $ 22.33 $ 22.19 $19.02
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.19)(a) (0.07)(a) (0.10)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (2.34) 0.16 3.85 5.63
=========================================================================================================================
Total from investment operations (2.56) (0.03) 3.78 5.53
=========================================================================================================================
Less distributions from net realized gains (0.03) (0.30) (3.64) (2.36)
=========================================================================================================================
Net asset value, end of period $ 19.41 $ 22.00 $ 22.33 $22.19
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) (11.66)% (0.10)% 17.95% 29.98%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $161,487 $68,085 $19,466 $1,564
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 2.08%(c) 2.05% 2.02% 2.11%(d)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.05)%(c) (0.87)% (0.27)% (0.72)%(d)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 38% 68% 72% 90%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $122,458,622.
(d) Annualized.
FS-24
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
JUNE 3, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
---------------------------------------------------------------------------
Net asset value, beginning of period $ 24.54
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.26)
===========================================================================
Total from investment operations (3.33)
===========================================================================
Less distributions from net realized gains (0.03)
===========================================================================
Net asset value, end of period $ 21.18
___________________________________________________________________________
===========================================================================
Total return(b) (13.59)%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,786
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets 1.58%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (0.55)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 38%
___________________________________________________________________________
===========================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $840,074.
FS-25
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS I
--------------
MARCH 15, 2002
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2002
----------------------------------------------------------------------------
Net asset value, beginning of period $ 25.03
----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a)
----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (3.77)
============================================================================
Total from investment operations (3.73)
============================================================================
Less distributions from net realized gains (0.03)
============================================================================
Net asset value, end of period $ 21.27
____________________________________________________________________________
============================================================================
Total return(b) (14.92)%
____________________________________________________________________________
============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,817
____________________________________________________________________________
============================================================================
Ratio of expenses to average net assets 0.82%(c)
============================================================================
Ratio of net investment income to average net assets 0.21%(c)
____________________________________________________________________________
============================================================================
Portfolio turnover rate 38%
____________________________________________________________________________
============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$2,810,072.
FS-26
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of AIM Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the AIM Small Cap Growth Fund (one of the funds constituting AIM Growth Series; hereafter referred to as the "Fund") at December 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Houston, Texas
February 14, 2003
FS-27
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2002
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-87.55%
AEROSPACE & DEFENSE-1.20%
Aeroflex Inc.(a) 425,000 $ 2,932,500
-------------------------------------------------------------------------------
Armor Holdings, Inc.(a) 175,000 2,409,750
-------------------------------------------------------------------------------
Engineered Support Systems, Inc. 120,000 4,399,200
-------------------------------------------------------------------------------
Integrated Defense Technologies, Inc.(a) 150,000 2,175,000
===============================================================================
11,916,450
===============================================================================
AIRLINES-0.24%
Frontier Airlines, Inc.(a) 350,000 2,366,000
===============================================================================
APPAREL RETAIL-3.88%
Chico's FAS, Inc.(a) 425,000 8,036,750
-------------------------------------------------------------------------------
Christopher & Banks Corp.(a) 210,700 4,372,025
-------------------------------------------------------------------------------
Gymboree Corp. (The)(a) 325,000 5,154,500
-------------------------------------------------------------------------------
Hot Topic, Inc.(a) 275,000 6,292,000
-------------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 315,000 5,572,350
-------------------------------------------------------------------------------
Too Inc.(a) 230,000 5,409,600
-------------------------------------------------------------------------------
Urban Outfitters, Inc.(a) 150,000 3,535,500
===============================================================================
38,372,725
===============================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.76%
Fossil, Inc.(a) 175,000 3,559,500
-------------------------------------------------------------------------------
Quicksilver, Inc.(a) 150,000 3,999,000
===============================================================================
7,558,500
===============================================================================
APPLICATION SOFTWARE-4.96%
Activision, Inc.(a) 125,000 1,823,750
-------------------------------------------------------------------------------
Autodesk, Inc. 225,000 3,217,500
-------------------------------------------------------------------------------
Business Objects S.A.-ADR (France)(a) 225,000 3,375,000
-------------------------------------------------------------------------------
Catapult Communications Corp.(a) 135,000 1,613,250
-------------------------------------------------------------------------------
Cognos, Inc. (Canada)(a) 200,000 4,690,000
-------------------------------------------------------------------------------
Documentum, Inc.(a) 400,000 6,264,000
-------------------------------------------------------------------------------
EPIQ Systems, Inc.(a) 200,000 3,064,000
-------------------------------------------------------------------------------
FactSet Research Systems Inc. 170,000 4,805,900
-------------------------------------------------------------------------------
Kronos Inc.(a) 100,000 3,699,000
-------------------------------------------------------------------------------
Macromedia, Inc.(a) 500,000 5,325,000
-------------------------------------------------------------------------------
National Instruments Corp.(a) 200,000 6,498,000
-------------------------------------------------------------------------------
Take-Two Interactive Software, Inc.(a) 200,000 4,698,000
===============================================================================
49,073,400
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.27%
Superior Industries International, Inc. 65,000 $ 2,688,400
===============================================================================
AUTOMOBILE MANUFACTURERS-0.42%
Monaco Coach Corp.(a) 250,000 4,137,500
===============================================================================
BANKS-2.39%
East West Bancorp., Inc. 100,000 3,608,000
-------------------------------------------------------------------------------
Prosperity Bancshares, Inc. 225,000 4,275,000
-------------------------------------------------------------------------------
Silicon Valley Bancshares(a) 150,000 2,737,500
-------------------------------------------------------------------------------
Southwest Bancorp. of Texas, Inc.(a) 150,250 4,328,702
-------------------------------------------------------------------------------
Sterling Bancshares, Inc. 162,500 1,985,750
-------------------------------------------------------------------------------
UCBH Holdings, Inc. 100,000 4,245,000
-------------------------------------------------------------------------------
Whitney Holding Corp. 75,000 2,499,750
===============================================================================
23,679,702
===============================================================================
BIOTECHNOLOGY-3.58%
Affymetrix, Inc.(a) 200,000 4,578,000
-------------------------------------------------------------------------------
Albany Molecular Research, Inc.(a) 175,000 2,588,425
-------------------------------------------------------------------------------
Array BioPharma Inc.(a) 250,000 1,387,500
-------------------------------------------------------------------------------
Cephalon, Inc.(a) 65,299 3,177,972
-------------------------------------------------------------------------------
Charles River Laboratories International,
Inc.(a) 175,000 6,734,000
-------------------------------------------------------------------------------
Connectics Corp.(a) 275,000 3,305,500
-------------------------------------------------------------------------------
Genencor International Inc.(a) 175,000 1,711,500
-------------------------------------------------------------------------------
Invitrogen Corp.(a) 125,000 3,916,250
-------------------------------------------------------------------------------
SangStat Medical Corp.(a) 264,000 2,983,200
-------------------------------------------------------------------------------
Techne Corp.(a) 175,000 4,999,400
===============================================================================
35,381,747
===============================================================================
BROADCASTING & CABLE TV-1.95%
Cox Radio, Inc.-Class A(a) 110,000 2,509,100
-------------------------------------------------------------------------------
Entercom Communications Corp.(a) 55,000 2,580,600
-------------------------------------------------------------------------------
Entravision Communications Corp.-Class A(a) 450,000 4,491,000
-------------------------------------------------------------------------------
Radio One, Inc.-Class A(a) 225,000 3,289,500
-------------------------------------------------------------------------------
Radio One, Inc.-Class D(a) 265,000 3,823,950
-------------------------------------------------------------------------------
TiVo Inc.(a) 500,000 2,615,000
===============================================================================
19,309,150
===============================================================================
BUILDING PRODUCTS-0.36%
Trex Co., Inc.(a) 100,000 3,530,000
===============================================================================
Casinos & Gambling-1.22%
Alliance Gaming Corp.(a) 250,000 4,257,500
-------------------------------------------------------------------------------
Shuffle Master, Inc.(a) 200,000 3,822,000
-------------------------------------------------------------------------------
|
FS-28
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
CASINOS & GAMBLING-(CONTINUED)
Station Casinos, Inc.(a) 225,000 $ 3,982,500
===============================================================================
12,062,000
===============================================================================
CATALOG RETAIL-0.72%
Insight Enterprises, Inc.(a) 350,000 2,908,500
-------------------------------------------------------------------------------
J. Jill Group Inc.(a) 300,000 4,194,000
===============================================================================
7,102,500
===============================================================================
COMMODITY CHEMICALS-0.46%
Spartech Corp. 175,000 3,610,250
-------------------------------------------------------------------------------
Summa Industries(a) 100,000 958,000
===============================================================================
4,568,250
===============================================================================
COMPUTER & ELECTRONICS RETAIL-0.27%
GameStop Corp.(a) 275,000 2,695,000
===============================================================================
COMPUTER HARDWARE-0.69%
Pinnacle Systems, Inc.(a) 500,000 6,805,000
===============================================================================
COMPUTER STORAGE & PERIPHERALS-0.87%
Applied Films Corp.(a) 300,000 5,997,000
-------------------------------------------------------------------------------
M-Systems Flash Disk Pioneers Ltd.
(Israel)(a) 350,000 2,558,500
===============================================================================
8,555,500
===============================================================================
CONSTRUCTION & ENGINEERING-0.25%
Shaw Group Inc. (The)(a) 150,000 2,467,500
===============================================================================
Construction, Farm Machinery & Heavy
Trucks-0.30%
AGCO Corp.(a) 135,000 2,983,500
===============================================================================
CONSUMER FINANCE-0.35%
Doral Financial Corp. (Puerto Rico) 120,000 3,432,000
===============================================================================
DATA PROCESSING SERVICES-1.68%
eSPEED, Inc.-Class A(a) 200,000 3,388,200
-------------------------------------------------------------------------------
InterCept, Inc.(a) 150,000 2,539,650
-------------------------------------------------------------------------------
Iron Mountain Inc.(a) 186,225 6,147,287
-------------------------------------------------------------------------------
ProBusiness Services, Inc.(a) 450,000 4,500,000
===============================================================================
16,575,137
===============================================================================
DIVERSIFIED COMMERCIAL SERVICES-3.39%
Career Education Corp.(a) 100,000 4,000,000
-------------------------------------------------------------------------------
Coinstar, Inc.(a) 150,000 3,397,500
-------------------------------------------------------------------------------
Corinthian Colleges, Inc.(a) 100,000 3,786,000
-------------------------------------------------------------------------------
Corporate Executive Board Co. (The)(a) 200,000 6,384,000
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Education Management Corp.(a) 150,000 $ 5,640,000
-------------------------------------------------------------------------------
FTI Consulting, Inc.(a) 100,000 4,015,000
-------------------------------------------------------------------------------
NCO Group, Inc.(a) 200,000 3,190,000
-------------------------------------------------------------------------------
PRG-Schultz International, Inc.(a) 350,000 3,115,000
===============================================================================
33,527,500
===============================================================================
DIVERSIFIED FINANCIAL SERVICES-0.99%
Affiliated Managers Group, Inc.(a) 70,000 3,521,000
-------------------------------------------------------------------------------
Euronet Worldwide, Inc.(a) 465,000 3,492,150
-------------------------------------------------------------------------------
Investors Financial Services Corp. 100,000 2,739,000
===============================================================================
9,752,150
===============================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.51%
II-VI Inc.(a) 180,000 2,890,800
-------------------------------------------------------------------------------
Power-One, Inc.(a) 375,000 2,126,250
===============================================================================
5,017,050
===============================================================================
ELECTRONIC EQUIPMENT & INSTRUMENTS-3.35%
FLIR Systems, Inc.(a) 120,000 5,856,000
-------------------------------------------------------------------------------
Keithley Instruments, Inc. 280,000 3,500,000
-------------------------------------------------------------------------------
KEMET Corp.(a) 250,000 2,185,000
-------------------------------------------------------------------------------
Photon Dynamics, Inc.(a) 250,000 5,700,000
-------------------------------------------------------------------------------
ScanSource, Inc.(a) 85,000 4,190,500
-------------------------------------------------------------------------------
Tektronix, Inc.(a) 250,000 4,547,500
-------------------------------------------------------------------------------
Varian Inc.(a) 250,000 7,172,500
===============================================================================
33,151,500
===============================================================================
ENVIRONMENTAL SERVICES-1.21%
Stericycle, Inc.(a) 160,000 5,180,640
-------------------------------------------------------------------------------
Waste Connections, Inc.(a) 175,000 6,756,750
===============================================================================
11,937,390
===============================================================================
FOOD DISTRIBUTORS-1.33%
Performance Food Group Co.(a) 200,000 6,791,800
-------------------------------------------------------------------------------
United Natural Foods, Inc.(a) 250,000 6,337,500
===============================================================================
13,129,300
===============================================================================
FOOD RETAIL-0.53%
Whole Foods Market, Inc.(a) 100,000 5,273,000
===============================================================================
GENERAL MERCHANDISE STORES-1.07%
99 Cents Only Stores(a) 225,000 6,043,500
-------------------------------------------------------------------------------
Fred's, Inc. 175,000 4,497,500
===============================================================================
10,541,000
===============================================================================
|
FS-29
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS & SERVICES-6.97%
Accredo Health, Inc.(a) 270,000 $ 9,517,500
-------------------------------------------------------------------------------
Advisory Board Co. (The)(a) 150,000 4,485,000
-------------------------------------------------------------------------------
Cerner Corp.(a) 175,000 5,470,500
-------------------------------------------------------------------------------
Covance Inc.(a) 140,000 3,442,600
-------------------------------------------------------------------------------
DaVita, Inc.(a) 200,000 4,934,000
-------------------------------------------------------------------------------
DIANON Systems, Inc.(a) 125,000 5,963,750
-------------------------------------------------------------------------------
Express Scripts, Inc.(a) 100,000 4,804,000
-------------------------------------------------------------------------------
First Horizon Pharmaceutical Corp.(a) 225,000 1,682,550
-------------------------------------------------------------------------------
ICON PLC-ADR (Ireland)(a) 150,000 4,036,500
-------------------------------------------------------------------------------
IMPAC Medical Systems, Inc.(a) 157,200 2,911,344
-------------------------------------------------------------------------------
Laboratory Corp. of America Holdings(a) 90,000 2,091,600
-------------------------------------------------------------------------------
Odyssey Healthcare, Inc.(a) 125,000 4,337,500
-------------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 120,000 4,807,200
-------------------------------------------------------------------------------
Pharmaceutical Product Development, Inc.(a) 200,000 5,854,000
-------------------------------------------------------------------------------
Priority Healthcare Corp.-Class B(a) 200,000 4,640,000
===============================================================================
68,978,044
===============================================================================
HEALTH CARE EQUIPMENT-5.76%
Advanced Neuromodulation Systems, Inc.(a) 68,100 2,390,310
-------------------------------------------------------------------------------
American Medical Systems Holdings, Inc.(a) 150,000 2,431,500
-------------------------------------------------------------------------------
Biosite Diagnostics Inc.(a) 125,000 4,252,500
-------------------------------------------------------------------------------
Bruker AXS Inc.(a) 500,000 905,000
-------------------------------------------------------------------------------
Bruker Daltonics, Inc.(a) 300,000 1,458,000
-------------------------------------------------------------------------------
CTI Molecular Imaging, Inc.(a) 125,000 3,082,500
-------------------------------------------------------------------------------
Cytyc Corp.(a) 500,000 5,100,000
-------------------------------------------------------------------------------
Diagnostic Products Corp. 115,000 4,441,300
-------------------------------------------------------------------------------
Fisher Scientific International Inc.(a) 85,000 2,556,800
-------------------------------------------------------------------------------
Integra LifeSciences Holdings(a) 175,000 3,088,750
-------------------------------------------------------------------------------
Med-Design Corp. (The)(a) 300,000 2,417,400
-------------------------------------------------------------------------------
ResMed Inc. 160,000 4,891,200
-------------------------------------------------------------------------------
STERIS Corp.(a) 200,000 4,850,000
-------------------------------------------------------------------------------
Wilson Greatbatch Technologies, Inc.(a) 250,000 7,300,000
-------------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 150,000 2,618,850
-------------------------------------------------------------------------------
Zoll Medical Corp.(a) 145,000 5,172,150
===============================================================================
56,956,260
===============================================================================
HEALTH CARE FACILITIES-1.42%
LifePoint Hospitals, Inc.(a) 270,000 8,081,370
-------------------------------------------------------------------------------
Triad Hospitals, Inc.(a) 200,000 5,966,000
===============================================================================
14,047,370
===============================================================================
HEALTH CARE SUPPLIES-0.57%
ICU Medical, Inc.(a) 150,000 5,595,000
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
HOMEBUILDING-0.46%
D.R. Horton, Inc. 147,375 $ 2,556,956
-------------------------------------------------------------------------------
Toll Brothers, Inc.(a) 100,000 2,020,000
===============================================================================
4,576,956
===============================================================================
HOTELS, RESORTS & CRUISE LINES-0.30%
Kerzner International Ltd. (Bahamas)(a) 150,000 3,012,000
===============================================================================
INDUSTRIAL MACHINERY-0.19%
Manitiwoc Co., Inc. (The) 75,000 1,912,500
===============================================================================
INSURANCE BROKERS-0.41%
Hilb, Rogal and Hamilton Co. 100,000 4,090,000
===============================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.13%
Intrado Inc.(a) 130,000 1,274,000
===============================================================================
INTERNET SOFTWARE & SERVICES-1.41%
Digital Insight Corp.(a) 175,000 1,520,750
-------------------------------------------------------------------------------
DoubleClick Inc.(a) 350,000 1,981,000
-------------------------------------------------------------------------------
Internet Security Systems, Inc.(a) 175,000 3,207,750
-------------------------------------------------------------------------------
OneSource Information Services, Inc.(a) 250,000 1,925,000
-------------------------------------------------------------------------------
Websense, Inc.(a) 250,000 5,340,250
===============================================================================
13,974,750
===============================================================================
IT CONSULTING & SERVICES-1.17%
CACI International Inc.-Class A(a) 150,000 5,346,000
-------------------------------------------------------------------------------
Forrester Research, Inc.(a) 200,000 3,114,000
-------------------------------------------------------------------------------
Titan Corp. (The)(a) 300,000 3,120,000
===============================================================================
11,580,000
===============================================================================
MANAGED HEALTH CARE-0.75%
Centene Corp.(a) 75,000 2,519,250
-------------------------------------------------------------------------------
First Health Group Corp.(a) 200,000 4,870,000
===============================================================================
7,389,250
===============================================================================
MOVIES & ENTERTAINMENT-1.33%
Macrovision Corp.(a) 275,000 4,411,000
-------------------------------------------------------------------------------
Pixar, Inc.(a) 125,000 6,623,750
-------------------------------------------------------------------------------
Regal Entertainment Group-Class A 100,000 2,142,000
===============================================================================
13,176,750
===============================================================================
MULTI-LINE INSURANCE-0.50%
HCC Insurance Holdings, Inc. 200,000 4,920,000
===============================================================================
NETWORKING EQUIPMENT-0.95%
Avocent Corp.(a) 235,000 5,221,700
-------------------------------------------------------------------------------
|
FS-30
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
NETWORKING EQUIPMENT-(CONTINUED)
NetScreen Technologies, Inc.(a) 250,000 $ 4,210,000
===============================================================================
9,431,700
===============================================================================
OFFICE SERVICES & SUPPLIES-0.30%
Daisytek International Corp.(a) 250,000 1,982,500
-------------------------------------------------------------------------------
MCSi, Inc.(a) 200,000 950,000
===============================================================================
2,932,500
===============================================================================
OIL & GAS DRILLING-1.83%
National-Oilwell, Inc.(a) 125,000 2,730,000
-------------------------------------------------------------------------------
Patterson-UTI Energy, Inc.(a) 260,000 7,844,200
-------------------------------------------------------------------------------
Pride International, Inc.(a) 300,000 4,470,000
-------------------------------------------------------------------------------
Varco International, Inc.(a) 175,000 3,045,000
===============================================================================
18,089,200
===============================================================================
OIL & GAS EQUIPMENT & SERVICES-3.32%
Cal Dive International, Inc.(a) 350,000 8,225,000
-------------------------------------------------------------------------------
FMC Technologies, Inc.(a) 200,000 4,086,000
-------------------------------------------------------------------------------
GulfMark Offshore, Inc.(a) 300,000 4,425,000
-------------------------------------------------------------------------------
Key Energy Services, Inc.(a) 550,000 4,933,500
-------------------------------------------------------------------------------
Newpark Resources, Inc.(a) 500,000 2,175,000
-------------------------------------------------------------------------------
TETRA Technologies, Inc.(a) 150,000 3,205,500
-------------------------------------------------------------------------------
Universal Compression Holdings, Inc.(a) 200,000 3,826,000
-------------------------------------------------------------------------------
Willbros Group, Inc. (Panama)(a) 240,000 1,972,800
===============================================================================
32,848,800
===============================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.81%
Chesapeake Energy Corp. 700,000 5,418,000
-------------------------------------------------------------------------------
Forest Oil Corp.(a) 150,000 4,147,500
-------------------------------------------------------------------------------
Newfield Exploration Co.(a) 125,000 4,506,250
-------------------------------------------------------------------------------
Spinnaker Exploration Co.(a) 175,000 3,858,750
===============================================================================
17,930,500
===============================================================================
PACKAGED FOODS & MEATS-0.33%
Horizon Organic Holding Corp.(a) 200,000 3,238,000
===============================================================================
Personal Products-0.28%
Steiner Leisure Ltd.(a) 200,000 2,788,000
===============================================================================
PHARMACEUTICALS-1.81%
aaiPharma Inc.(a) 200,000 2,804,000
-------------------------------------------------------------------------------
Barr Laboratories, Inc.(a) 50,000 3,254,500
-------------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A(a) 125,000 6,208,750
-------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 150,000 5,640,000
===============================================================================
17,907,250
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-0.40%
Fidelity National Financial, Inc. 121,000 $ 3,972,430
===============================================================================
PUBLISHING-0.77%
Getty Images, Inc.(a) 250,000 7,637,500
===============================================================================
RESTAURANTS-3.09%
Cosi, Inc.(a) 254,100 1,412,796
-------------------------------------------------------------------------------
Krispy Kreme Doughnuts, Inc.(a) 120,000 4,052,400
-------------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(a) 200,000 7,260,000
-------------------------------------------------------------------------------
Panera Bread Co.-Class A(a) 175,000 6,091,750
-------------------------------------------------------------------------------
RARE Hospitality International, Inc.(a) 215,000 5,938,300
-------------------------------------------------------------------------------
Sonic Corp.(a) 281,250 5,762,813
===============================================================================
30,518,059
===============================================================================
SEMICONDUCTOR EQUIPMENT-2.46%
Advanced Energy Industries, Inc.(a) 150,000 1,908,000
-------------------------------------------------------------------------------
ASE Test Ltd. (Taiwan)(a) 325,000 1,300,000
-------------------------------------------------------------------------------
Asyst Technologies, Inc.(a) 325,000 2,388,750
-------------------------------------------------------------------------------
Credence Systems Corp.(a) 240,000 2,239,200
-------------------------------------------------------------------------------
Cymer, Inc.(a) 125,000 4,031,250
-------------------------------------------------------------------------------
FEI Co.(a) 220,000 3,363,800
-------------------------------------------------------------------------------
Mykrolis Corp.(a) 600,000 4,380,000
-------------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a) 200,000 4,752,200
===============================================================================
24,363,200
===============================================================================
SEMICONDUCTORS-4.22%
Actel Corp.(a) 275,000 4,460,500
-------------------------------------------------------------------------------
ChipPAC, Inc.-Class A(a) 786,500 2,792,075
-------------------------------------------------------------------------------
Cree, Inc.(a) 325,000 5,313,750
-------------------------------------------------------------------------------
Exar Corp.(a) 225,000 2,790,000
-------------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a) 300,000 5,475,000
-------------------------------------------------------------------------------
Intersil Corp.-Class A(a) 186,000 2,592,840
-------------------------------------------------------------------------------
NVIDIA Corp.(a) 175,000 2,014,250
-------------------------------------------------------------------------------
O2Micro International Ltd. (Cayman
Islands)(a) 300,000 2,924,700
-------------------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 200,000 2,714,000
-------------------------------------------------------------------------------
Pixelworks, Inc.(a) 300,000 1,740,000
-------------------------------------------------------------------------------
Semtech Corp.(a) 300,000 3,276,000
-------------------------------------------------------------------------------
Silicon Storage Technology, Inc.(a) 400,000 1,616,000
-------------------------------------------------------------------------------
Zoran Corp.(a) 285,000 4,009,950
===============================================================================
41,719,065
===============================================================================
SPECIALTY CHEMICALS-0.53%
Cambrex Corp. 175,000 5,286,750
===============================================================================
|
FS-31
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
SPECIALTY STORES-2.38%
CarMax, Inc.(a) 275,000 $ 4,917,000
-------------------------------------------------------------------------------
Copart, Inc.(a) 270,000 3,196,800
-------------------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 175,000 2,642,500
-------------------------------------------------------------------------------
Rent-A-Center, Inc.(a) 140,000 6,993,000
-------------------------------------------------------------------------------
Restoration Hardware, Inc.(a) 400,000 2,004,000
-------------------------------------------------------------------------------
Tractor Supply Co.(a) 100,000 3,760,000
===============================================================================
23,513,300
===============================================================================
STEEL-0.29%
Gibraltar Steel Corp. 150,000 2,856,000
===============================================================================
SYSTEMS SOFTWARE-1.38%
Network Associates, Inc.(a) 185,625 2,986,706
-------------------------------------------------------------------------------
Red Hat, Inc.(a) 700,000 4,137,000
-------------------------------------------------------------------------------
SafeNet, Inc.(a) 200,000 5,070,000
-------------------------------------------------------------------------------
SonicWALL, Inc.(a) 400,000 1,452,000
===============================================================================
13,645,706
===============================================================================
TELECOMMUNICATIONS EQUIPMENT-0.55%
Anaren Microwave, Inc.(a) 225,000 1,980,000
-------------------------------------------------------------------------------
UTStarcom, Inc.(a) 175,000 3,470,250
===============================================================================
5,450,250
===============================================================================
TRADING COMPANIES & DISTRIBUTORS-0.28%
Fastenal Co. 75,000 2,804,250
===============================================================================
Total Common Stocks & Other Equity
Interests (Cost $910,121,065) 866,004,191
===============================================================================
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-0.18%
U.S. Treasury Bills-0.18%
1.18%, 03/20/03 (Cost $1,745,526)(b) $ 1,750,000(c) $ 1,745,526
===============================================================================
SHARES
MONEY MARKET FUNDS-10.98%
STIC Liquid Assets Portfolio(d) 54,326,016 54,326,016
-------------------------------------------------------------------------------
STIC Prime Portfolio(d) 54,326,016 54,326,016
===============================================================================
Total Money Market Funds (Cost
$108,652,032) 108,652,032
===============================================================================
TOTAL INVESTMENTS-98.71% (excluding
investments purchased with cash collateral
from securities loans) (Cost
$1,020,518,623) 976,401,749
===============================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANS
MONEY MARKET FUNDS-25.97%
STIC Liquid Assets Portfolio(d)(e) 128,448,619 128,448,619
-------------------------------------------------------------------------------
STIC Prime Portfolio(d)(e) 128,448,618 128,448,618
===============================================================================
Total Money Market Funds (purchased with
cash collateral from securities loans)
(Cost $256,897,237) 256,897,237
===============================================================================
TOTAL INVESTMENTS-124.68% (Cost
$1,277,415,860) 1,233,298,986
===============================================================================
OTHER ASSETS LESS LIABILITIES-(24.68)% (244,161,875)
===============================================================================
NET ASSETS-100.00% $ 989,137,111
_______________________________________________________________________________
===============================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security traded on a discount basis. The interest rate shown represents the
discount rate at the time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned.
See Notes to Financial Statements.
FS-32
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments, at market value (cost
$1,277,415,860)* $1,233,298,986
------------------------------------------------------------
Receivables for:
Variation margin 6,500
------------------------------------------------------------
Fund shares sold 20,458,893
------------------------------------------------------------
Dividends 233,050
------------------------------------------------------------
Investment for deferred compensation plan 5,790
------------------------------------------------------------
Other assets 83,456
============================================================
Total assets 1,254,086,675
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 2,559,418
------------------------------------------------------------
Fund shares reacquired 3,964,114
------------------------------------------------------------
Deferred compensation plan 5,790
------------------------------------------------------------
Collateral upon return of securities
loaned 256,897,237
------------------------------------------------------------
Accrued distribution fees 756,251
------------------------------------------------------------
Accrued transfer agent fees 534,157
------------------------------------------------------------
Accrued operating expenses 232,597
============================================================
Total liabilities 264,949,564
============================================================
Net assets applicable to shares outstanding $ 989,137,111
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 790,699,664
____________________________________________________________
============================================================
Class B $ 152,577,138
____________________________________________________________
============================================================
Class C $ 41,692,522
____________________________________________________________
============================================================
Class R $ 1,301,356
____________________________________________________________
============================================================
Institutional Class $ 2,866,431
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 42,804,444
____________________________________________________________
============================================================
Class B 8,725,547
____________________________________________________________
============================================================
Class C 2,385,814
____________________________________________________________
============================================================
Class R 70,578
____________________________________________________________
============================================================
Institutional Class 154,717
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 18.47
------------------------------------------------------------
Offering price per share:
(Net asset value of $18.47 divided by
94.50%) $ 19.54
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 17.49
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 17.48
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 18.44
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 18.53
____________________________________________________________
============================================================
|
* At December 31, 2002, securities with an aggregate market value of $252,803,712 were on loan to brokers.
STATEMENT OF OPERATIONS
For the year ended December 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign withholding tax
of $5,040) $ 762,972
------------------------------------------------------------
Dividends from affiliated money market
funds 2,324,973
------------------------------------------------------------
Interest 29,622
------------------------------------------------------------
Security lending income 1,294,148
============================================================
Total investment income 4,411,715
============================================================
EXPENSES:
Advisory fees 7,192,423
------------------------------------------------------------
Administrative services fees 206,896
------------------------------------------------------------
Custodian fees 85,558
------------------------------------------------------------
Distribution fees -- Class A 2,671,094
------------------------------------------------------------
Distribution fees -- Class B 1,944,775
------------------------------------------------------------
Distribution fees -- Class C 516,983
------------------------------------------------------------
Distribution fees -- Class R 1,176
------------------------------------------------------------
Transfer agent fees 2,941,835
------------------------------------------------------------
Trustees' fees 13,987
------------------------------------------------------------
Other 496,970
============================================================
Total expenses 16,071,697
============================================================
Less: Fees waived and expenses reimbursed (635,458)
------------------------------------------------------------
Expenses paid indirectly (17,370)
============================================================
Net expenses 15,418,869
============================================================
Net investment income (loss) (11,007,154)
============================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FUTURES CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (144,269,499)
------------------------------------------------------------
Futures contracts (2,552,554)
------------------------------------------------------------
Option contracts written 126,893
============================================================
(146,695,160)
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities (183,451,348)
------------------------------------------------------------
Futures contracts (935,035)
============================================================
(184,386,383)
============================================================
Net gain (loss) from investment securities,
futures contracts and option contracts (331,081,543)
============================================================
Net increase (decrease) in net assets
resulting from operations $(342,088,697)
____________________________________________________________
============================================================
|
See Notes to Financial Statements.
FS-33
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2002 and 2001
2002 2001
--------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (11,007,154) $ (6,785,278)
--------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and option contracts (146,695,160) (66,665,383)
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, and futures contracts (184,386,383) (23,595,827)
============================================================================================
Net increase (decrease) in net assets resulting from
operations (342,088,697) (97,046,488)
============================================================================================
Distributions to shareholders from net realized gains:
Class A -- (737,984)
--------------------------------------------------------------------------------------------
Class B -- (243,755)
--------------------------------------------------------------------------------------------
Class C -- (51,933)
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A 365,751,498 174,077,937
--------------------------------------------------------------------------------------------
Class B 9,058,506 13,080,520
--------------------------------------------------------------------------------------------
Class C 13,385,434 10,328,231
--------------------------------------------------------------------------------------------
Class R 1,257,422 --
--------------------------------------------------------------------------------------------
Institutional Class 2,877,566 --
============================================================================================
Net increase in net assets 50,241,729 99,406,528
============================================================================================
NET ASSETS:
Beginning of year 938,895,382 839,488,854
============================================================================================
End of year $ 989,137,111 $938,895,382
____________________________________________________________________________________________
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,261,666,001 $880,330,701
--------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (14,211) (2,183)
--------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, futures contracts and option contracts (228,078,850) (81,383,690)
--------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and futures contracts (44,435,829) 139,950,554
============================================================================================
$ 989,137,111 $938,895,382
____________________________________________________________________________________________
============================================================================================
|
See Notes to Financial Statements.
FS-34
NOTES TO FINANCIAL STATEMENTS
December 31, 2002
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund, (the "Fund") is a separate series of AIM Growth
Series (the "Trust"). The Trust is organized as a Delaware statutory trust and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of three
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund currently offers five different classes of shares:
Class A shares, Class B shares, Class C shares, Class R shares and Institutional
Class 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
("CDSC"). Under some circumstances, Class A and Class R shares are subject to
CDSC charges. Class R shares and Institutional Class shares are sold at net
asset value. Generally, Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. 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. Effective as of the close of
business on March 18, 2002, the Fund has been closed to new investors.
The Fund's investment objective is long-term growth of capital. In the Schedule of Investments each company is organized in the United States unless otherwise noted.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 -- Securities, including restricted securities, are valued according to the following policy. A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not securities reported on the NASDAQ National Market System) is valued at the closing bid price furnished by independent pricing services or market makers. Each security reported on the NASDAQ National Market System is valued at the last sales price as of the close of the customary trading session 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 institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. 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 Trust's officers in a manner specifically authorized by the Board of Trustees. Short-term obligations having 60 days or less to maturity and commercial paper 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 the customary trading session of the New York Stock Exchange ("NYSE").
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the 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 the close of the respective markets. Events affecting the values of such foreign securities may occur between the times at which the particular foreign market closes and the close of the customary trading session of the NYSE which would not be reflected in the computation of the Fund's net asset value. If a development/event is so significant that there is a reasonably high degree of certainty as to both the effect and the degree of effect that the development/event has actually caused that closing price to no longer reflect actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the NYSE as determined in good faith by or under the supervision of the Board of Trustees.
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 on the accrual basis from settlement date. Dividend income is recorded on the ex-dividend date.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
C. DISTRIBUTIONS -- Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to use a portion of the proceeds from 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 gain) which is distributed to
FS-35
shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
E. FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks include the possibility of an illiquid market and that a change in value of the contracts may not correlate with changes in the value of the securities being hedged. Risks also include to varying degrees, the risk of loss in excess of the variation margin disclosed in the Statement of Assets and Liabilities.
F. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
G. PUT OPTIONS -- The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. A risk in buying an option is that the Fund pays a premium whether or not the option is exercised. In addition, there can be no assurance that a liquid secondary market will exist for any option purchased or sold.
H. EXPENSES -- Distribution expenses directly attributable to a class of shares are charged to the respective classes' operations. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses are charged to each class pursuant to a transfer agency and service agreement adopted by the Fund with respect to such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets exceeding $1.5 billion. AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds in which the Fund has invested. For the year ended December 31, 2002, AIM waived fees of $23,725.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2002, AIM was paid $206,896 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and shareholder services to the Fund. During the year ended December 31, 2002, AFS retained $1,012,887 for such services.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B, Class C, Class R and the Institutional Class shares of the Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A shares, Class B shares, Class C shares and Class R 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, 1.00% of the average daily net assets of Class B and Class C shares and 0.50% of the average daily net assets of Class R shares. 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, Class C or Class R 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. NASD Rules also impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. During the Fund's closing to new investors, AIM Distributors has agreed to waive 0.10% of the Fund's average daily net assets of Class A distribution plan fees. Pursuant to the Plans, for the year ended December 31, 2002, the Class A, Class B, Class C and Class R shares paid $2,059,361, $1,944,775, $516,983 and $1,176, respectively after plan fees waived by AIM Distributors of $611,733 for Class A shares.
FS-36
Front-end sales commissions and CDSCs are not expenses of the Fund. Front-end sales commissions are deducted from proceeds from the sales of Fund shares prior to investment in Class A shares of the Fund. CDSCs are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended December 31, 2002, AIM Distributors retained $198,431 in front-end sales commissions from the sale of Class A shares and $20,785, $35, $33,061 and $0 for Class A, Class B, Class C shares and Class R shares, respectively, for CDSCs imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AFS and/or AIM Distributors.
During the year ended December 31, 2002, the Fund paid legal fees of $4,406 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3--INDIRECT EXPENSES
For the year ended December 31, 2002, the Fund received reductions in transfer agency fees from AFS (an affiliate of AIM) of $15,049 and reductions in custodian fees of $2,321 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $17,370.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each trustee who is not an "interested person" of AIM. Trustees have the option to defer compensation payable by the Trust. The Trustees deferring compensation have the option to select various AIM Funds in which all or part of their deferral accounts shall be deemed to be invested.
NOTE 5--BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $500,000,000 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,
2002, 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. The commitment fee is allocated among
the funds based on their respective average net assets for the period.
NOTE 6--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities to the extent of one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral pursuant to these loans is invested in short-term money market instruments or affiliated money market funds. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day. Therefore, the value of the collateral may be temporarily less than the value of the securities on loan.
At December 31, 2002, securities with an aggregate value of $252,803,712 were on loan to brokers. The loans were secured by cash collateral of $256,897,237 received by the Fund and subsequently invested in affiliated money market funds as follows: $128,448,619 in STIC Liquid Assets Portfolio and $128,448,618 in STIC Prime Portfolio. For the year ended December 31, 2002, the Fund received fees of $1,294,148 for securities lending.
NOTE 7--FUTURES CONTRACTS
On December 31, 2002, $872,000 principal amount of U.S. Treasury obligations were pledged as collateral to cover margin requirements for open futures contracts. Open futures contracts as of December 31, 2002 were as follows:
UNREALIZED
NO. OF MONTH/ MARKET APPRECIATION
CONTRACT CONTRACTS COMMITMENT VALUE (DEPRECIATION)
--------------------------------------------------------------------
Russell 2000
Index 65 Mar-03/Long $12,454,000 $(318,955)
____________________________________________________________________
====================================================================
|
NOTE 8--CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 2002 are summarized as follows:
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------
Beginning of year -- $ --
----------------------------------------------------------
Written 2,500 301,389
----------------------------------------------------------
Closed (625) (68,358)
----------------------------------------------------------
Exercised (1,174) (161,996)
----------------------------------------------------------
Expired (701) (71,035)
==========================================================
End of year -- $ --
__________________________________________________________
==========================================================
|
FS-37
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF BENEFICIAL INTEREST
Distributions to Shareholders:
The tax character of distributions paid during the years ended December 31, 2002 and 2001 was as follows:
2002 2001
--------------------------------------------------------------
Distributions paid from ordinary income $ -- $1,033,672
______________________________________________________________
==============================================================
|
Tax Components of Beneficial Interest:
As of December 31, 2002, the components of beneficial interest on a tax basis were as follows:
Unrealized appreciation
(depreciation) -- investments $ (47,505,723)
------------------------------------------------------------
Temporary book/tax differences (14,211)
------------------------------------------------------------
Capital loss carryforward (210,613,708)
------------------------------------------------------------
Post-October capital loss deferral (14,395,248)
------------------------------------------------------------
Shares of beneficial interest 1,261,666,001
============================================================
$ 989,137,111
____________________________________________________________
============================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains/(losses) on certain futures contracts.
The temporary book/tax differences are a result of timing differences between book and tax recognition of income and/or expenses. The Fund's temporary book/tax differences are the result of trustee deferral of compensation and retirement plan expenses.
The Fund's capital loss carryforward expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------------------
December 31, 2009 $ 68,295,841
----------------------------------------------------------
December 31, 2010 142,317,867
==========================================================
$210,613,708
__________________________________________________________
==========================================================
|
NOTE 10--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, 2002 was $579,359,352 and $195,523,350, respectively.
The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 2002 is as follows:
Aggregate unrealized appreciation of investment securities $ 133,601,115 ------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (181,106,838) ============================================================ Net unrealized appreciation (depreciation) of investment securities $ (47,505,723) ____________________________________________________________ ============================================================ Cost of investments for tax purposes is $1,280,804,709. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of net operating losses on December 31, 2002, undistributed net investment income was increased by $10,995,126 and shares of beneficial interest decreased by $10,995,126. This reclassification had no effect on the net assets of the Fund.
FS-38
NOTE 12--SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 2002 and 2001 were as follows:
2002 2001
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 31,251,216 $ 673,450,471 14,079,041 $ 339,333,818
-------------------------------------------------------------------------------------------------------------------------
Class B 2,742,366 62,377,993 2,180,576 50,242,136
-------------------------------------------------------------------------------------------------------------------------
Class C 1,431,329 32,124,408 851,777 19,751,706
-------------------------------------------------------------------------------------------------------------------------
Class R* 77,652 1,386,762 -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class** 168,960 3,138,624 -- --
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 30,868 776,744
-------------------------------------------------------------------------------------------------------------------------
Class B -- -- 9,645 226,413
-------------------------------------------------------------------------------------------------------------------------
Class C -- -- 2,003 47,155
=========================================================================================================================
Conversion of Class B shares to Class A shares:***
Class A 238,309 5,287,422 -- --
-------------------------------------------------------------------------------------------------------------------------
Class B (250,272) (5,287,422) -- --
=========================================================================================================================
Reacquired:
Class A (15,143,035) (312,986,395) (6,654,156) (166,032,625)
-------------------------------------------------------------------------------------------------------------------------
Class B (2,464,023) (48,032,065) (1,567,212) (37,388,029)
-------------------------------------------------------------------------------------------------------------------------
Class C (959,396) (18,738,974) (397,721) (9,470,630)
-------------------------------------------------------------------------------------------------------------------------
Class R* (7,074) (129,340) -- --
-------------------------------------------------------------------------------------------------------------------------
Institutional Class** (14,243) (261,058) -- --
=========================================================================================================================
17,071,789 $ 392,330,426 8,534,821 $ 197,486,688
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
* Class R shares commenced sales on June 3, 2002. ** Institutional Class shares commenced sales on March 15, 2002. *** Prior to the year ended December 31, 2002, conversion of Class B shares to Class A shares were included in Class A shares sold and Class B shares reacquired.
FS-39
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.67 $ 29.81 $ 31.87 $ 17.03 $ 14.27
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.18)(a) (0.13) (0.09)(a) (0.19)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (7.01) (3.93) (0.12) 15.47 3.45
================================================================================================================================
Total from investment operations (7.20) (4.11) (0.25) 15.38 3.26
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 18.47 $ 25.67 $ 29.81 $ 31.87 $ 17.03
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.05)% (13.79)% (0.74)% 90.64% 23.15%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $790,700 $679,104 $566,458 $428,378 $24,737
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.35%(c) 1.31% 1.13% 1.54% 1.76%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 1.43%(c) 1.39% 1.23% 1.54% 2.20%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (0.91)%(c) (0.70)% (0.40)% (0.38)% (1.29)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include sales
charges.
(c) Ratios are based on average net assets of $763,169,831.
CLASS B
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
2002 2001 2000 1999 1998
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.48 $ 28.64 $ 30.92 $ 16.64 $ 14.06
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.40) (0.24)(a) (0.29)(a)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.07) 15.06 3.37
================================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 14.82 3.08
================================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54) (0.50)
================================================================================================================================
Net asset value, end of period $ 17.49 $ 24.48 $ 28.64 $ 30.92 $ 16.64
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) (28.55)% (14.42)% (1.48)% 89.40% 22.22%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $152,577 $212,958 $231,293 $240,150 $26,448
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19% 2.40%
--------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19% 2.85%
================================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)% (1.96)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate 22% 37% 62% 56% 190%
________________________________________________________________________________________________________________________________
================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and does not include contingent
deferred sales charges.
(c) Ratios are based on average daily net assets of $194,477,505.
FS-40
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------
MAY 3, 1999
YEAR ENDED DECEMBER 31, (DATE SALES COMMENCED)
----------------------------------- TO DECEMBER 31,
2002 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.47 $ 28.63 $ 30.91 $ 19.03
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.33)(a) (0.35)(a) (0.39) (0.17)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (6.66) (3.78) (0.08) 12.59
=============================================================================================================================
Total from investment operations (6.99) (4.13) (0.47) 12.42
=============================================================================================================================
Less distributions from net realized gains (losses) -- (0.03) (1.81) (0.54)
=============================================================================================================================
Net asset value, end of period $ 17.48 $ 24.47 $ 28.63 $ 30.91
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return (28.57)% (14.43)% (1.48)% 65.56%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted)(b) $41,693 $46,833 $41,738 $40,530
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.08%(c) 2.03% 1.88% 2.19%(d)
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.08%(c) 2.04% 1.88% 2.19%(d)
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (1.64)%(c) (1.43)% (1.15)% (1.03)%(d)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 22% 37% 62% 56%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Does not include contingent
deferred sales charges and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $51,698,285.
(d) Annualized.
FS-41
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
----------------------
JUNE 3, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.64
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13)(a)
======================================================================================
Net losses on securities (both realized and unrealized) (4.07)
======================================================================================
Total from investment operations (4.20)
======================================================================================
Net asset value, end of period $ 18.44
______________________________________________________________________________________
======================================================================================
Total return(b) (18.55)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 1,301
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 1.61%(c)
--------------------------------------------------------------------------------------
Without fee waivers 1.61%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (1.17)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $407,028.
FS-42
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
----------------------
MARCH 17, 2002
(DATE SALES COMMENCED)
TO DECEMBER 31,
2002
--------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.61
--------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------------
Net losses on securities (both realized and unrealized) (6.01)
======================================================================================
Total from investment operations (6.08)
======================================================================================
Net asset value, end of period $ 18.53
______________________________________________________________________________________
======================================================================================
Total return(b) (24.71)%
______________________________________________________________________________________
======================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 2,866
______________________________________________________________________________________
======================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.89%(c)
--------------------------------------------------------------------------------------
Without fee waivers 0.89%(c)
======================================================================================
Ratio of net investment income (loss) to average net assets (0.45)%(c)
______________________________________________________________________________________
======================================================================================
Portfolio turnover rate 22%
______________________________________________________________________________________
======================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $514,814.
FS-43
PART C
OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Amended and Restated Agreement and Declaration of Trust of
Registrant, dated May 15, 2002.(9)
- (b) Amendment No. 1, dated May 15, 2002, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(9)
- (c) Amendment No. 2, dated September 23, 2002, to the Amended
and Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.(10)
b - Amended and Restated By-Laws of Registrant, adopted
effective May 15, 2002.(9)
c - Articles II, VI, VII, VIII and IX of Registrant's Amended and
Restated Agreement and Declaration of Trust, as amended, and
Articles IV, V and VI of the Amended and Restated Bylaws,
define rights of holders of shares.(9)
d (1) - (a) Master Investment Advisory Agreement, dated June 5, 2000,
between the Registrant and A I M Advisors, Inc.(6)
- (b) Amendment No. 1, dated September 11, 2000, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(6)
- (c) Amendment No. 2, dated September 1, 2001, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(8)
- (d) Amendment No. 3, dated July 1, 2002, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(10)
|
- (e) Amendment No. 4, dated September 23, 2002, to the Master Investment Advisory Agreement, dated June 5, 2000, between the Registrant and A I M Advisors, Inc.(10)
e (1) - (a) First Amended and Restated Master Distribution Agreement,
dated July 1, 2000, between Registrant and A I M Distributors,
Inc., with respect to Class A and Class C shares.(6)
- (b) Amendment No. 1, dated March 15, 2002, to the First
Amended and Restated Master Distribution Agreement, dated July
1, 2000, between Registrant and A I M Distributors, Inc. with
respect to Class A and Class C Shares.(8)
- (c) Amendment No. 2, dated June 3, 2002, to the First Amended
and Restated Master Distribution Agreement, dated July 1,
2000, between Registrant and A I M Distributors, Inc. with
respect to Class A, Class C, and Institutional Class
shares.(10)
|
- (d) Amendment No. 3, dated July 1, 2002, to the First Amended and Restated Master Distribution Agreement, dated July 1, 2000, between Registrant and A I M Distributors, Inc. with respect to Class A, Class C, Class R and Institutional Class shares.(10)
- (e) Amendment No. 4, dated September 23, 2002, to the First Amended and Restated Master Distribution Agreement, dated July 1, 2000, between Registrant and A I M Distributors, Inc. with respect to Class A, Class C, Class R and Institutional shares.(10)
(2) - (a) First Amended and Restated Master Distribution Agreement,
dated December 31, 2000, between Registrant and A I M
Distributors, Inc., with respect to Class B shares.(6)
- (b) Amendment No. 1, dated September 10, 2001, to the First
Amended and Restated Master Distribution Agreement, dated
December 31, 2000, between Registrant and A I M Distributors,
Inc. with respect to Class B shares.(8)
- (c) Amendment No. 2, dated July 1, 2002, to the First Amended
and Restated Master Distribution Agreement, dated December 31,
2000, between Registrant and A I M Distributors, Inc. with
respect to Class B shares.(10)
|
- (d) Amendment No. 3, dated September 23, 2002, to the First Amended and restated Master Distribution Agreement, dated December 31, 2000, between Registrant and A I M Distributors, Inc. with respect to Class B shares.(10)
(3) - Form of Selected Dealer Agreement for Investment Companies
Managed by A I M Advisors, Inc.(6)
(4) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks.(3)
f (1) - AIM Funds Retirement Plan for Eligible Directors/Trustees, as
restated October 1, 2001.(7)
(2) - Form of AIM Funds Director Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors, as amended September
26, 2002.(10)
g (1) - (a) Master Custodian Contract, dated May 1, 2000, between
State Street Bank and Trust Company and Registrant.(6)
- (b) Amendment No. 1 dated May 1, 2000, to Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(6)
- (c) Amendment, dated June 29, 2001, to Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(7)
- (d) Amendment, dated April 2, 2002, to the Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(8)
(2) - (a) Subcustodian Agreement, dated September 9, 1994, among the
Registrant, Texas Commerce Bank National Association, State
Street Bank and Trust Company and A I M Fund Services, Inc.(7)
- (b) Amendment No 1, dated October 2, 1998, to Subcustodian
Agreement among the Registrant, Texas Commerce Bank National
Association now known as Chase Bank of Texas, N.A., State
Street Bank and Trust Company and A I M Fund Services, Inc.(7)
|
- (c) Amendment No. 2, dated March 15, 2002, to Subcustodian Agreement among
the Registrant, JP Morgan Chase Bank (formerly Chase Bank of Texas, N.A., and formerly Texas Commerce Bank National Association), State Street Bank and Trust Company and A I M Fund Services, Inc.(10)
(3) - Subcustodian Agreement, dated January 20, 1993, between State
Street Bank and Trust Company and The Bank of New York.(7)
(4) - Foreign Assets Delegation Agreement, dated June 29, 2001,
between Registrant and A I M Advisors, Inc.(7)
h (1) - (a) Transfer Agency and Service Agreement between Registrant
and A I M Fund Services, Inc., dated September 8, 1998.(3)
- (b) Amendment No. 1, dated May 3, 1999, to the Transfer Agency
and Service Agreement between Registrant and A I M Fund
Services, Inc.(4)
- (c) Amendment No. 2, dated July 1, 1999, to the Transfer
Agency and Service Agreement between Registrant and A I M Fund
Services, Inc.(5)
- (d) Amendment No. 3, dated July 1, 1999, to the Transfer
Agency and Service Agreement between Registrant and A I M Fund
Services, Inc.(5)
- (e) Amendment No. 4, dated February 11, 2000, to the Transfer
Agency and Service Agreement between Registrant and A I M Fund
Services, Inc.(5)
- (f) Amendment No. 5, dated July 1, 2000, to the Transfer
Agency and Service Agreement between Registrant and A I M Fund
Services, Inc.(6)
- (g) Amendment No. 6, dated March 4, 2002, to the Transfer
Agency and Service Agreement between Registrant and A I M Fund
Services, Inc.(8)
(2) - (a) Master Administrative Services Agreement, dated June 5,
2000, between Registrant and A I M Advisors, Inc.(6)
- (b) Amendment No. 1, dated September 11, 2000, to the Master
Administrative Services Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.(6)
- (c) Amendment No. 2, dated September 1, 2001, to the Master
Administrative Services Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.(7)
- (d) Amendment No. 3, dated July 1, 2002, to the Master
Administrative Services Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.(10)
|
- (e) Amendment No. 4, dated September 23, 2002, to the Master Administrative Services Agreement, dated June 5, 2000, between Registrant and A I M Advisors, Inc.(10)
(3) - Memorandum of Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc. regarding securities
lending with respect to all Funds.(6)
(4) - Interfund Loan Agreement, dated September 18, 2001, between
Registrant and A I M Advisors, Inc.(7)
C-3
|
i - Legal Opinion - None.
j (1) - Consent of Ballard Spahr Andrews & Ingersoll, LLP.(10)
(2) - Consent of PricewaterhouseCoopers LLP.(10)
k - Omitted Financial Statements - None.
l - Initial Capital Agreements - None.
m (1) - (a) Third Amended and Restated Master Distribution Plan, dated
June 3, 2002, adopted pursuant to Rule 12b-1, with respect to
Class A, Class C and Class R shares.(10)
|
- (b) Amendment No. 1, dated July 1, 2002, to Third Amended and Restated Master Distribution Plan, dated June 3, 2002, adopted pursuant to Rule 12b-1, with respect to Class A, Class C and Class R shares.(10)
(c) Amendment No. 2, dated September 23, 2002, to Third Amended and Restated Master Distribution Plan, dated June 3, 2002, adopted pursuant to Rule 12b-1, with respect to Class A, Class C and Class R shares.(10)
(2) - (a) First Amended and Restated Master Distribution Plan, dated
December 31, 2000, adopted pursuant to Rule 12b-1, with
respect to Class B shares.(6)
- (b) Amendment No. 1, dated September 10, 2001, to the First
Amended and Restated Master Distribution Plan, dated December
31, 2000, adopted pursuant to Rule 12b-1, with respect to
Class B shares.(8)
|
- (c) Amendment No. 2, dated July 1, 2002, to the First Amended and Restated Master Distribution Plan, dated December 31, 2000, adopted pursuant to Rule 12b-1, with respect to Class B shares.(10)
- (d) Amendment No. 3, dated September 23, 2002, to the First Amended and Restated Master Distribution Plan, dated December 31, 2000, adopted pursuant to Rule 12b-1 with respect to Class B shares.(10)
(3) - Form of Shareholder Service Agreement to be used in connection
with Registrant's Distribution Plans.(6)
(4) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans.(6)
(5) - Form of Variable Group Annuity Contractholder Service
Agreement.(6)
(6) - Form of Agency Pricing Agreement (for Class A Shares) to be
used in connection with Registrant's Master Distribution
Plans.(10)
(7) - Form of Service Agreement for Bank Trust Department and for
Brokers for Bank Trust Departments to be used in connection
with Registrant's Distribution Plans.(6)
(8) - Form of Shareholder Service Agreement for Shares of the Mutual
Funds.(6)
C-4
|
n - Second Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R), effective December 12, 2001, as amended
and restated March 4, 2002, and further amended and restated
October 31, 2002.(10)
o - Reserved.
p (1) - A I M Management Group Inc. Code of Ethics, adopted May 1,
1981, as last amended September 27, 2002, relating to A I M
Management Group Inc. and A I M Advisors, Inc. and its wholly
owned and indirect subsidiaries.(10)
(2) - Code of Ethics of AIM Growth Series, effective as of September
28, 2000.(6)
----------------
|
(1) Incorporated by reference to PEA No. 43, filed on June 1, 1998.
(2) Incorporated by reference to PEA No. 45, filed on August 26, 1998.
(3) Incorporated by reference to PEA No. 46, filed on February 12, 1999.
(4) Incorporated by reference to PEA No. 47, filed on April 14, 1999.
(5) Incorporated by reference to PEA No. 48, filed on April 28, 2000.
(6) Incorporated by reference to PEA No. 49, filed on April 24, 2001.
(7) Incorporated by reference to PEA No. 50, filed on December 28, 2001.
(8) Incorporated by reference to PEA No. 51, filed on April 26, 2002.
(9) Incorporated by reference to PEA No. 52, filed on April 24, 2003.
(10) Filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control With the Fund
None.
Item 25. Indemnification
The Registrant's Amended and Restated Agreement and Declaration of Trust of Registrant, dated May 15, 2002, 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 Statutory 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 for the obligations of any other series of the Registrant.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment companies managed by AIM, their respective officers, trustees, directors and employees (the "Insured Parties") are insured under a joint Mutual Fund and Investment Advisory Professional and Directors and Officers Liability Policy, issued by ICI Mutual Insurance Company, with a $35,000,000 limit of liability.
Section 16 of the Master Investment Advisory Agreement between the Registrant and AIM provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of AIM or any of its officers, directors or employees, that AIM shall not be subject to liability to the Registrant or to any series of the Registrant, or to any shareholder of any series of the Registrant for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. Any liability of AIM to any series of the Registrant shall not automatically impart liability on the part of AIM to any other series of the Registrant. No series of the Registrant shall be liable for the obligations of any other series of the Registrant.
Insofar as indemnification for liabilities 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 connection with the successful defense of any action suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the shares 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 be governed by final adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of the Advisor's directors and officers is with the Advisor and its affiliated companies. Reference is also made to the caption "Fund Management - The Advisor" in the Prospectus which comprises Part A of the Registration Statement, and to the caption "Investment Advisory and Other Services" of the Statement of Additional Information which comprises Part B of the Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter, also acts as a principal underwriter to the following investment companies:
AIM Advisor Funds
AIM Equity Funds
AIM Floating Rate Fund
AIM Funds Group
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund
AIM Tax-Exempt Funds
AIM Variable Insurance Funds
(b)
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Fund
-------- ----------- ----
Michael J. Cemo Chairman, Director, President, & None
Chief Executive Officer
Mark H. Williamson Director Trustee & Executive Vice President
Gary T. Crum Director Senior Vice President
Gene L. Needles Executive Vice President None
James L. Salners Executive Vice President None
John S. Cooper Senior Vice President None
Marilyn M. Miller Senior Vice President None
Leslie A. Schmidt Senior Vice President None
James E. Stueve Senior Vice President None
Stephen H. Bitteker First Vice President None
Glenda A. Dayton First Vice President None
Gary K. Wendler First Vice President None
Kevin M. Carome Vice President None
Mary A. Corcoran Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel & Assistant Secretary
Assistant Secretary
Kim T. McAuliffe Vice President None
Linda L. Warriner Vice President None
Rebecca Starling-Klatt Chief Compliance Officer & Assistant None
Vice President
Kathleen J. Pflueger Secretary Assistant Secretary
|
(c) Not applicable
Item 28. Location of Accounts and Records
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended, are maintained and held in the offices of the Registrant and its sub-advisors, INVESCO Asset Management Ltd., 30 Funsbury Square, London EC2A IAG, England, and its custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
Records covering shareholder accounts and portfolio transactions are also maintained and kept by the Registrant's Transfer Agent, A I M Fund Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and by the Registrant's custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
Item 29. Management Services
None.
Item 30. Undertakings
None.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 24th day of April, 2003.
REGISTRANT: AIM GROWTH SERIES
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ ROBERT H. GRAHAM Chairman, Trustee & President April 24, 2003
------------------------------ (Principal Executive Officer)
(Robert H. Graham)
/s/ FRANK S. BAYLEY Trustee April 24, 2003
------------------------------
(Frank S. Bayley)
/s/ BRUCE L. CROCKETT Trustee April 24, 2003
------------------------------
(Bruce L. Crockett)
/s/ ALBERT R. DOWDEN Trustee April 24, 2003
------------------------------
(Albert R. Dowden)
/s/ EDWARD K. DUNN, JR. Trustee April 24, 2003
------------------------------
(Edward K. Dunn, Jr.)
/s/ JACK M. FIELDS Trustee April 24, 2003
------------------------------
(Jack M. Fields)
/s/ CARL FRISCHLING Trustee April 24, 2003
------------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee April 24, 2003
------------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee April 24, 2003
------------------------------
(Lewis F. Pennock)
/s/ RUTH H. QUIGLEY Trustee April 24, 2003
------------------------------
(Ruth H. Quigley)
/s/ LOUIS S. SKLAR Trustee April 24, 2003
------------------------------
(Louis S. Sklar)
/s/ MARK H. WILLIAMSON Trustee & April 24, 2003
------------------------------
(Mark H. Williamson) Executive Vice President
Vice President & Treasurer April 24, 2003
/s/ DANA R. SUTTON (Principal Financial and
------------------------------ Accounting Officer)
(Dana R. Sutton)
|
INDEX
Exhibit
Number Description
------ -----------
a(1)(c) Amendment No. 2, dated September 23, 2002, to the Amended and
Restated Agreement and Declaration of Trust of Registrant,
dated May 15, 2002.
d(1)(d) Amendment No. 3, dated July 1, 2002, to the Master Investment
Advisory Agreement, dated June 5, 2000, between the Registrant
and A I M Advisors, Inc.
d(1)(e) Amendment No. 4, dated September 23, 2002, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.
e(1)(c) Amendment No. 2, dated June 3, 2002, to the First Amended and
Restated Master Distribution Agreement, dated July 1, 2000,
between Registrant and A I M Distributors, Inc. with respect
to Class A, Class C. Class R and Institutional Class shares.
e(1)(d) Amendment No. 3, dated July 1, 2002, to the First Amended and
Restated Master Distribution Agreement, dated July 1, 2000,
between Registrant and A I M Distributors, Inc. with respect
to Class A, Class C, Class R and Institutional Class shares.
e(1)(e) Amendment No. 4, dated September 23, 2002, to the First
Amended and Restated Master Distribution Agreement, dated July
1, 2000, between Registrant and A I M Distributors, Inc. with
respect to Class A, Class C, Class R and Institutional shares.
e(2)(c) Amendment No. 2, dated July 1, 2002, to the First Amended and
Restated Master Distribution Agreement, dated December 31,
2000, between Registrant and A I M Distributors, Inc. with
respect to B shares.
e(2)(d) Amendment No. 3, dated September 23, 2002, to the First
Amended and Restated Master Distribution Agreement, dated
December 31, 2000, between Registrant and A I M Distributors,
Inc. with respect to B shares.
f(2) Form of AIM Funds Director Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors, as amended September
26, 2002.
g(2)(c) Amendment No. 2, dated March 15, 2002, to Subcustodian
Agreement among the Registrant, JP Morgan Chase Bank (formerly
Chase Bank of Texas, N.A., and formerly Texas Commerce Bank
National Association), State Street Bank and Trust Company and
A I M Fund Services, Inc.
h(2)(d) Amendment No. 3, dated July 1, 2002, to the Master
Administrative Services Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.
h(2)(e) Amendment No. 4, dated September 23, 2002, to the Master
Administrative Services Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP.
j(2) Consent of PricewaterhouseCoopers LLP.
C-9
|
m(1)(a) Third Amended and Restated Master Distribution Plan, dated
June 3, 2002, adopted pursuant to Rule 12b-1, with respect to
Class A, Class C and class R shares.
m(1)(b) Amendment No. 1, dated July 1, 2002, to Third Amended and
Restated Master Distribution Plan, dated June 3, 2002, adopted
pursuant to Rule 12b-1 with respect to Class A, Class C and
Class R shares.
m(1)(c) Amendment No. 2, dated September 23, 2002, to Third Amended
and Restated Master Distribution Plan, dated June 3, 2002,
adopted pursuant to Rule 12b-1, with respect to Class A, Class
C and Class R shares.
m(2)(c) Amendment No. 2, dated July 1, 2002, to the First Amended and
restated Master Distribution Plan, dated December 31, 2000,
adopted pursuant to Rule 12b-1, with respect to Class B
shares.
m(2)(d) Amendment No. 3, dated September 23, 2002, to the First
Amended and Restated Master Distribution Plan, dated December
31, 2000, adopted pursuant to Rule 12b-1 with respect to Class
B shares.
m(6) Form of Agency Pricing Agreement (for Class A Shares) to be
used in connection with Registrant's Master Distribution
Plans.
n Second Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R), effective December 12, 2001, as amended
and restated March 4, 2002, and further amended and restated
October 31, 2002.
p(1) The A I M Management Group Inc. Code of Ethics, adopted May 1,
1981, as last amended September 27, 2002, relating to A I M
Management Group Inc. and A I M Advisors, Inc. and its wholly
owned and indirect subsidiaries.
|
EXHIBIT a(1)(c)
AMENDMENT NO. 2
TO
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
OF
AIM GROWTH SERIES
This Amendment No. 2 to the Amended and Restated Agreement and Declaration of Trust of AIM Growth Series (this "Amendment") amends, effective as of September 23, 2002, the Amended and Restated Agreement and Declaration of Trust of AIM Growth Series (the "Trust") dated as of May 15, 2002 (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM GROWTH SERIES
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM Basic Value Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Mid Cap Core Equity Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Small Cap Growth Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of September 23, 2002.
By: /s/ ROBERT H. GRAHAM -------------------------------------- Name: Robert H. Graham Title: President |
EXHIBIT d(1)(d)
AMENDMENT NO. 3
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of July 1, 2002, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 5, 2000, between AIM Growth Series, a Delaware business trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to reflect the name change of AIM Mid Cap Equity Fund to AIM Mid Cap Core Equity Fund;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A and Appendix B to the Agreement are hereby deleted in their entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT ------------ ------------------------------------ AIM Basic Value Fund June 5, 2000 AIM Euroland Growth Fund September 1, 2001 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000 |
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM BASIC VALUE FUND
AIM MID CAP CORE EQUITY FUND
AIM SMALL CAP GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million .......................................................... 0.725% Next $500 million ........................................................... 0.70% Next $500 million ........................................................... 0.675% Excess over $1.5 billion .................................................... 0.65% |
AIM EUROLAND GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million .......................................................... 0.975% Next $500 million ........................................................... 0.95% Next $500 million ........................................................... 0.925% Excess over $1.5 billion .................................................... 0.90%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
EXHIBIT d(1)(e)
AMENDMENT NO. 4
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of September 23, 2002, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 5, 2000, between AIM Growth Series, a Delaware business trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to delete a portfolio, AIM Euroland Growth Fund;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A and Appendix B to the Agreement are hereby deleted in their entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT ------------ ------------------------------------ AIM Basic Value Fund June 5, 2000 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000 |
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM BASIC VALUE FUND
AIM MID CAP CORE EQUITY FUND
AIM SMALL CAP GROWTH FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million................................................................................... 0.725% Next $500 million.................................................................................... 0.70% Next $500 million.................................................................................... 0.675% Excess over $1.5 billion............................................................................. 0.65%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
EXHIBIT e(1)(c)
AMENDMENT NO. 2
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM GROWTH SERIES
(CLASS A SHARES, CLASS C SHARES AND INSTITUTIONAL CLASS SHARES)
AND
A I M DISTRIBUTORS, INC.
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated July 1, 2000, by and between AIM Growth Series, a Delaware business trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
1. The following paragraph is added at the end of Section FOURTH:
(A):
"The public offering price of the Class R shares shall be the net asset value per share of the applicable Class R shares. Net asset value per share shall be determined in accordance with the provisions of the then current prospectus and statement of additional information of the applicable Portfolio. The Distributor may establish a schedule of contingent deferred sales charges to be imposed at the time of redemption of the Shares, and such schedule shall be disclosed in the current prospectus of each Portfolio. Such schedule of contingent deferred sales charges may reflect variations in or waivers of such charges on redemptions of Class R shares, either generally to the public or to any specified class of shareholders and/or in connection with any specified class of transactions, in accordance with applicable rules and regulations and exemptive relief granted by the Securities and Exchange Commission, and as set forth in the Portfolios' current prospectus(es). The Distributor and the Company shall apply any then applicable scheduled variation in or waiver of contingent deferred sales charges uniformly to all shareholders and/or all transactions belonging to a specified class."
2. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS A SHARES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
CLASS C SHARES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
CLASS R SHARES
AIM Basic Value Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
INSTITUTIONAL CLASS SHARES
AIM Basic Value Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 3, 2002
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------ -------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT e(1)(d)
AMENDMENT NO. 3
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS A SHARES, CLASS C SHARES, CLASS R SHARES AND INSTITUTIONAL CLASS SHARES)
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated July 1, 2000, by and between AIM Growth Series, a Delaware business trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS A SHARES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
CLASS C SHARES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
CLASS R SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
INSTITUTIONAL CLASS SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 1, 2002
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------ -------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT e(1)(e)
AMENDMENT NO. 4
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS A SHARES, CLASS C SHARES, CLASS R SHARES AND INSTITUTIONAL CLASS SHARES)
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated July 1, 2000, by and between AIM Growth Series, a Delaware business trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS A SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
CLASS C SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
CLASS R SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
INSTITUTIONAL CLASS SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: September 23, 2002
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------ -------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT e(2)(c)
AMENDMENT NO. 2
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated December 31, 2000, by and between AIM Growth Series, a Delaware business trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A to the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS B SHARES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 1, 2002
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------ -------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT e(2)(d)
AMENDMENT NO. 3
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated December 31, 2000, by and between AIM Growth Series, a Delaware business trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A to the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS B SHARES
AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: September 23, 2002
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------ -------------------------------
Assistant Secretary Michael J. Cemo
President
|
EXHIBIT f(2)
AIM FUNDS
DIRECTOR DEFERRED COMPENSATION AGREEMENT
As Amended March 7, 2000, September 28, 2001 and September 26, 2002
AIM FUNDS
DIRECTOR DEFERRED COMPENSATION AGREEMENT
AGREEMENT, made on this __ day of _______, 20__, by and between the registered open-end investment companies listed on Appendix A hereto (the "Funds"), and _______________________________________________________ (the "Director") residing at _______________________________________.
WHEREAS, the Funds and the Director have entered into agreements pursuant to which the Director will serve as a director/trustee of the Funds; and
WHEREAS, if the Funds and the Director have previously entered into an additional agreement whereby the Funds will provide to the Director a vehicle under which the Director can defer receipt of directors' fees payable by the Funds, they now desire to amend and restate such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the Funds and the Director hereby agree as follows:
1. DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Agreement shall have the following meanings:
(a) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Director.
(b) "Boards of Directors" shall mean the respective Boards of Directors of the Funds.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of directors' fees paid by each of the Funds to the Director during a Deferral Year prior to reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or amounts of the Director's Compensation deferred under the provisions of Section 3 of this Agreement.
(f) "Deferral Accounts" shall mean the accounts maintained to reflect the Director's Compensation Deferrals made pursuant to Section 3 hereof (or pursuant to any prior agreement) and any other credits or debits thereto.
(g) "Deferral Year" shall mean each calendar year during which the Director makes, or is entitled to make, Compensation Deferrals under Section 3 hereof.
(h) "Retirement" shall have the same meaning as set forth under the Retirement Plan.
(i) "Retirement Plan" shall mean the "AIM Funds Retirement Plan for Eligible Directors/Trustees."
(j) "Valuation Date" shall mean the last business day of each calendar year and any other day upon which the Funds makes valuations of the Deferral Accounts.
1.2 Plurals and Gender. Where appearing in this Agreement the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning.
1.3 Directors and Trustees. Where appearing in this Agreement, "Director" shall also refer to "Trustee" and "Board of Directors" shall also refer to "Board of Trustees."
1.4 Headings. The headings and sub-headings in this Agreement are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof.
1.5 Separate Agreement for Each Fund. This Agreement is drafted, and shall be construed, as a separate agreement between the Director and each of the Funds.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
2.1 Commencement of Compensation Deferrals. The Director may elect, on a form provided by, and submitted to, the Presidents of the respective Funds, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the later of (i) the date this Agreement is executed or (ii) the date such form is submitted to the Presidents of the Funds.
2.2 Termination of Deferrals. The Director shall not be eligible to make Compensation Deferrals after the earliest of the following dates:
(a) The date on which he ceases to serve as a Director of all of the Funds; or
(b) The effective date of the termination of this Agreement.
3. COMPENSATION DEFERRALS
3.1 Compensation Deferral Elections.
(a) On or prior to the first day of any Deferral Year, the Director may elect, on the form described in Section 2.1 hereof, to defer the receipt of all or a portion of his Compensation for such Deferral Year. Such writing shall set forth the amount of such Compensation Deferral (in whole percentage amounts). Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below.
(b) Compensation Deferrals shall be withheld from each payment of Compensation by the Funds to the Director based upon the percentage amount elected by the Director under Section 3.1(a) hereof.
(c) The Director may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the Presidents of the Funds a revised Compensation Deferral election form. Such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the Presidents of the Funds.
3.2 Valuation of Deferral Account.
(a) Each Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Director's Compensation Deferrals under this Agreement made with respect to Compensation earned from each such Fund. Compensation Deferrals shall be allocated to the Deferral Accounts on the first business day following the date such Compensation Deferrals are withheld from the Director's Compensation. As of the date of this Agreement, the Deferral Accounts also shall be credited with the amounts credited to the Director under each other outstanding elective deferred compensation agreement entered into by and between the Funds and the Director which is superseded by this Agreement pursuant to Section 6.11 hereof. The Deferral Accounts shall be debited to reflect any distributions from such Accounts. Such debits shall be allocated to the Deferral Accounts as of the date such distributions are made.
(b) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Accounts are invested in the manner set forth under Section 3.3, below) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Director's Deferral Accounts.
3.3 Investment of Deferral Account Balances.
(a) (1) The Director may select, from various options made available by the Funds, the investment media in which all or part of his Deferral Accounts shall be deemed to be invested.
(2) The Director shall make an investment designation on a form provided by the Presidents of the Funds which shall remain effective until another valid direction has been made by the Director as herein provided. The Director may amend his investment designation by giving written direction to the Presidents of the Funds in such manner and at such time as the Funds may permit, but no less frequently than quarterly on thirty (30) days' notice prior to the end of a calendar quarter. A timely change to a Director's investment designation shall become effective as soon as practicable following receipt by the Presidents of the Funds.
(3) The investment media deemed to be made available to the Director, and any limitation on the maximum or minimum percentages of the Director's Deferral Accounts that may be invested any particular medium, shall be the same as from time-to-time communicated to the Director by the Presidents of the Funds.
(b) Except as provided below, the Director's Deferral Accounts shall be deemed to be invested in accordance with his investment designations, provided such designations conform to the provisions of this Section. If -
(1) the Director does not furnish the Presidents of the Funds with complete, written investment instructions, or
(2) the written investment instructions from the Director are unclear, then the Director's election to make Compensation Deferrals hereunder shall be held in abeyance and have no force or effect until such time as the Director shall provide the Presidents of the Funds with complete investment instructions. Notwithstanding the above, the Boards of Directors, in their sole discretion, may disregard the Director's election and determine that all Compensation Deferrals shall be deemed to be invested in a fund determined by the Boards of Directors. In the event that any fund under which any portion of the Director's Deferral Accounts is deemed to be invested ceases to exist, such portion of the Deferral Accounts thereafter shall be held in the successor to such fund, subject to subsequent deemed investment elections.
The Funds shall provide an annual statement to the Director showing such information as is appropriate, including the aggregate amount in the Deferral Accounts, as of a reasonably current date.
4. DISTRIBUTIONS FROM DEFERRAL ACCOUNTS
4.1 Payment Date and Methods.
(a) Designation of Date. Each deferral direction given pursuant to
Section 3.1 shall include designation of the Payment Date for the value of the
amount deferred. Such Payment Date shall be the first day of any calendar
quarter, subject to the limitation set forth in paragraph 4.1(c).
(b) Extension Date. At least one year before the Payment Date initially designated pursuant to paragraph 4.1(a) above, the Participant may irrevocably elect to extend such Payment Date to the first day of any calendar quarter, subject to the limitation set forth in paragraph 4.1(c).
(c) Limitation. The Director shall select a Payment Date (or extended Payment Date) that is no sooner than the earlier of (i) the January 1 that follows the second anniversary of the Participant's deferral election made pursuant to paragraph 4.1(a) or (b) or (ii) the January 1 of the year after the Participant's Retirement.
(d) Methods of Payment. Distributions from the Director's Deferral Accounts shall be paid in cash in a single sum unless the Participant elects, at the time a Payment Date is selected pursuant to paragraph 4.1(a) or 4.1(b), to receive the amount payable in generally equal quarterly installments over a period not to exceed ten (10) years. In addition, at least one year before the Payment Date, a Director may change the method of payment previously selected.
(e) Irrevocability. Except as provided in paragraphs 4.1(b) and 4.1(d), a designation of a Payment Date and an election of installment payments shall be irrevocable; provided, however, that payment shall be made or begin on a different date as follows:
(1) Upon the Director's death, payment shall be made in accordance with Section 4.2,
(2) Upon the Director's ceasing to serve as a director of all of the Funds for reasons other than death or Retirement, payment shall be made or begin within three months after the end of the calendar year in which such termination occurs in accordance with the method elected by the Director pursuant to paragraph 4.1(d) provided the designation of such method had been made at least one year before such termination occurred, except that the Boards of Directors, in their sole discretion, may accelerate the distribution of such Deferral Accounts,
(3) Upon termination of this Agreement, payment shall be made in accordance with Section 5.2, and
(4) In the event of the liquidation, dissolution or winding up of a Fund or the distribution of all or substantially all of a Fund's assets and property relating to one or more series of its shares to the shareholders of such series (for this purpose a sale, conveyance or transfer of a Fund's assets to a trust, partnership, association or corporation in exchange for cash, shares or other securities with the transfer being made subject to, or with the assumption by the transferee of, the liabilities of the Fund shall not be deemed a termination of the Fund or such a distribution), all unpaid balances of the Deferral Accounts related to such Fund as of the effective date thereof shall be paid in a lump sum on such effective date.
4.2 Death Prior to Complete Distribution of Deferral Accounts. Upon the death of the Director prior to the commencement of the distribution of the amounts credited to his Deferral Accounts, the balance of such Accounts shall be distributed to his Beneficiary in accordance with the method of payment selected pursuant to paragraph 4.1(d), commencing as soon as practicable after the Director's death. In the event of the death of the Director after the commencement of such distribution, but prior to the complete distribution of his Deferral Accounts, the balance of the amounts credited to his Deferral Accounts shall be distributed to his Beneficiary over the remaining period during which such amounts were distributable to the Director under Section 4.1 hereof. Notwithstanding the above, the Boards of Directors, in their sole discretion, may accelerate the distribution of the Deferral Accounts.
4.3 Designation of Beneficiary. For purposes of Section 4.2 hereof, the
Director's Beneficiary shall be the person or persons so designated by the
Director in a written instrument submitted to the Presidents of the Funds. In
the event the Director fails to properly designate a Beneficiary, his
Beneficiary shall be the person or persons in the first of the following classes
of successive preference Beneficiaries surviving at the death of the Director:
the Director's (1) surviving spouse or (2) estate.
4.4 Payments Due Missing Persons. The Funds shall make a reasonable effort to locate all persons entitled to benefits under this Agreement. However, notwithstanding any provisions of this Agreement to the contrary, if, after a period of five (5) years from the date such
benefit shall be due, any such persons entitled to benefits have not been located, their rights under this Agreement shall stand suspended. Before this provision becomes operative, the Funds shall send a certified letter to all such persons to their last known address advising them that their benefits under this Agreement shall be suspended. Any such suspended amounts shall be held by the Funds for a period of three (3) additional years (or a total of eight (8) years from the time the benefits first become payable) and thereafter, if unclaimed, such amounts shall be forfeited.
5. AMENDMENTS AND TERMINATION
5.1 Amendments.
(a) The Funds and the Director may, by a written instrument signed by, or on behalf of, such parties, amend this Agreement at any time and in any manner.
(b) The Funds reserve the right to amend, in whole or in part, and in any manner, any or all of the provisions of this Agreement by action of their Boards of Directors for the purposes of complying with any provision of the Code or any other technical or legal requirements, provided that:
(1) No such amendment shall make it possible for any part of the Director's Deferral Accounts to be used for, or diverted to, purposes other than for the exclusive benefit of the Director or his Beneficiaries, except to the extent otherwise provided in this Agreement; and
(2) No such amendment may reduce the amount of the Director's Deferral Accounts as of the effective date of such amendment.
5.2 Termination. The Director and the Funds may, by written instrument signed by, or on behalf of, such parties, terminate this Agreement at any time. In the event of the termination of this Agreement, the Boards of Directors, in their sole discretion, may choose to pay out the Director's Deferral Accounts prior to the designated Payment Dates. Otherwise, following a termination of this Agreement, such Accounts shall continue to be maintained in accordance with the provisions of this Agreement until the time they are paid out.
6. MISCELLANEOUS.
6.1 Rights of Creditors.
(a) This Agreement is unfunded. Neither the Director nor any other persons shall have any interest in any specific asset or assets of the Funds by reason of any Deferral Accounts hereunder, nor any rights to receive distribution of his Deferral Accounts except and as to the extent expressly provided hereunder. The Funds shall not be required to purchase, hold or dispose of any investments pursuant to this Agreement; however, if in order to cover their obligations hereunder the Funds elect to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Funds, subject to the claims of their general creditors and no person other than the Funds shall by virtue of the provisions of this Agreement have any interest in such assets other than an interest as a general creditor.
(b) The rights of the Director and the Beneficiaries to the amounts held in the Deferral Accounts are unsecured and shall be subject to the creditors of the Funds. With respect to the payment of amounts held under the Deferral Accounts, the Director and his Beneficiaries have the status of unsecured creditors of the Funds. This Agreement is executed on behalf of the Funds by an officer, or other representative, of the Funds as such and not individually. Any obligation of the Funds hereunder shall be an unsecured obligation of the Funds and not of any other person.
6.2 Agents. The Funds may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform their duties under this Agreement. The Funds shall bear the cost of such services and all other expenses they incur in connection with the administration of this Agreement.
6.3 Liability and Indemnification. Except for their own gross negligence, willful misconduct or willful breach of the terms of this Agreement, the Funds shall be indemnified and held harmless by the Director against liability or losses occurring by reason of any act or omission of the Funds or any other person.
6.4 Incapacity. If the Funds shall receive evidence satisfactory to them that the Director or any Beneficiary entitled to receive any benefit under the Agreement is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Director or Beneficiary and that no guardian, committee or other representative of the estate of the Director or Beneficiary shall have been duly appointed, the Funds may make payment of such benefit otherwise payable to the Director or Beneficiary to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.
6.5 Cooperation of Parties. All parties to this Agreement and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Agreement or any of its provisions.
6.6 Governing Law. This Agreement is made and entered into in the State of Texas and all matters concerning its validity, construction and administration shall be governed by the laws of the State of Texas.
6.7 Nonguarantee of Directorship. Nothing contained in this Agreement shall be construed as a contract or guarantee of the right of the Director to be, or remain as, a director of any of the Funds or to receive any, or any particular rate of, Compensation from any of the Funds.
6.8 Counsel. The Funds may consult with legal counsel with respect to the meaning or construction of this Agreement, their obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel.
6.9 Spendthrift Provision. The Director's and Beneficiaries' interests in the Deferral Accounts may not be anticipated, sold, encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor become subject to execution, garnishment or attachment and any attempt to do so by any person shall render the Deferral Accounts immediately forfeitable.
6.10 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service providing for a signed return receipt, addressed to the Director at the home address set forth in the Funds' records and to the Funds at the address set forth on the first page of this Agreement, provided that all notices to the Funds shall be directed to the attention of the Presidents of the Funds or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
6.11 Entire Agreement. This Agreement contains the entire understanding between the Funds and the Director with respect to the payment of non-qualified elective deferred compensation by the Fund to the Director. Effective as of the date hereof, this Agreement replaces, and supersedes, all other non-qualified elective deferred compensation agreements by and between the Director and the Funds.
6.12 Interpretation of Agreement. Interpretations of, and determinations (including factual determinations) related to, this Agreement made by the Funds in good faith, including any determinations of the amounts of the Deferral Accounts, shall be conclusive and binding upon all parties; and the Funds shall not incur any liability to the Director for any such interpretation or determination so made or for any other action taken by it in connection with this Agreement in good faith.
6.13 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Funds and their successors and assigns and to the Director and his heirs, executors, administrators and personal representatives.
6.14 Severability. In the event any one or more provisions of this Agreement are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability.
6.15 Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
The Funds
By:
------------------------ ------------------------
Witness Name:
Title:
------------------------ ----------------------------
Witness Director
|
DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
|
"Agreement") dated as of ________________________ by and between the undersigned and the AIM Funds, I hereby make the following elections:
Deferral of Compensation
Starting with Compensation to be paid to me with respect to services provided by me to the AIM Funds after the date this election Form is received by the AIM Funds, I hereby elect that ______ percent (_____%) of my Compensation (as defined under the Agreement) be reduced and that the Fund establish a bookkeeping account credited with amounts equal to the amount so reduced (the "Deferral Account"). The Deferral Account shall be further credited with income equivalents as provided under the Agreement. I understand that this election will remain in effect with respect to Compensation I earn in subsequent years unless I modify or revoke it. I further understand that such modification or revocation will be effective only prospectively and will apply commencing with the Compensation I earn in the calendar year that begins after the change is received by you.
Payment Date
I hereby designate ________ 1 (select the first month in any calendar quarter) in the year ______ (select a year that is at least two years after the year this election is made) as the Payment Date for the amounts credited to my Deferral Account pursuant to the election made above. If my Retirement (as defined in the Agreement) occurs sooner, I [ ] do [ ] do not (check the appropriate box) want payment of such amounts to commence effective the January 1 following my Retirement. I understand that amounts credited to my Deferral Account may be paid to me prior to the Payment Date as provided in the Agreement.
Payment Method
I hereby elect to receive the amounts credited to my Deferral Account in (check one)
[ ] a single payment in cash
[ ] annual installments for a period of ____ (select no more than 10 years)
beginning within 30 days following the payment date selected above.
I understand that the amounts credited to my Deferral Account shall remain the general assets of the AIM Funds and that, with respect to the payment of such amounts, I am merely a general creditor of the AIM Funds. I may not sell, encumber, pledge, assign or otherwise alienate the amounts credited to my Deferral Account.
I hereby agree that the terms of the Agreement are incorporated herein and are made a part hereof. Dated as of the day and year first above written.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
AIM Funds
------------------------------
By:
--------------------------
Date:
------------------------
|
DEFERRED COMPENSATION AGREEMENT
INVESTMENT DIRECTION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") by and between the undersigned and the AIM Funds, I hereby elect that my Deferral Account under the Agreement be considered to be invested as follows (in multiples of 10%):
NAME OF FUND %
------------ ---
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
%
----------------------------------- --
|
I acknowledge that I may amend this Investment Agreement in the manner, and at such time, as permitted under the Agreement. Furthermore, I acknowledge that, pursuant to Section 3.3(b) of the Agreement, the Fund has reserved the right to disregard the elections made above to consider my Deferral Account to be deemed to be invested in a fund of its choosing.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
|
DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") by and between the undersigned and the AIM Funds, I hereby make the following beneficiary designations:
I. Primary Beneficiary
I hereby appoint the following as my Primary Beneficiary(ies) to receive at my death the amounts credited to my Deferral Account under the Agreement. In the event I am survived by more than one Primary Beneficiary, such Primary Beneficiaries shall share equally in such amounts unless I indicate otherwise on an attachment to this form:
----------------------------------------------------------------- Name Relationship ----------------------------------------------------------------- Address ----------------------------------------------------------------- City State Zip |
II. Secondary Beneficiary |
In the event I am not survived by any Primary Beneficiary, I hereby appoint the following as Secondary Beneficiary(ies) to receive death benefits under the Agreement. In the event I am survived by more than one Secondary Beneficiary, such Secondary Beneficiaries shall share equally unless I indicate otherwise on an attachment to this form:
----------------------------------------------------------------- Name Relationship ----------------------------------------------------------------- Address ----------------------------------------------------------------- City State Zip |
I understand that I may revoke or amend the above designations at any time. I further understand that if I am not survived by a Primary or Secondary Beneficiary, my Beneficiary shall be as set forth under the Agreement.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
|
PAYMENT DATE ELECTION FORM
FOR PREVIOUSLY DEFERRED COMPENSATION
TO: Presidents of the AIM Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
|
"Agreement") by and between the undersigned and the AIM Funds, pursuant to which I have previously elected to defer Compensation,
Payment Date Change:
I hereby designate ________ 1 (select the first month in any
calendar quarter) in the year ______ (select a year that is at least two years
after the year this election is made) as the Payment Date for the amounts
previously credited to my Deferral Account and amounts subsequently credited
thereto. If my Retirement (as defined in the Agreement) occurs sooner, I [ ] do
[ ] do not (check the appropriate box) want payment of such amounts to commence
effective the January 1 following my Retirement. I understand that amounts
credited to my Deferral Account may be paid to me prior to the Payment Date as
provided in the Agreement.
Payment Method Change
I hereby elect to receive the amounts credited to my Deferral Account in (check one)
[ ] a single payment in cash
[ ] annual installments for a period of ____ (select no more than 10 years)
I understand that this change in payment method will not be given effect unless my Payment Date is at least one year from the date hereof and I do not cease to be a Director within such year.
I understand that I may amend this designation in the manner, and at such time, as permitted under the Agreement.
WITNESS: DIRECTOR:
------------------------- ------------------------------
WITNESS: RECEIVED:
------------------------- AIM Funds
By:
---------------------------
Date:
-------------------------
|
DEFERRED COMPENSATION AGREEMENT
SUMMARY
Your Deferred Compensation Agreement (the "Agreement") allows you to defer some or all of your annual trustee's fees otherwise payable by the Funds. Deferred fees are deemed invested in certain mutual funds selected by you. The deferral is pre-tax, and the deferred amount and the credited gains, losses and income are not subject to tax until paid out to you.
Your deferrals (and investment experience) are posted to a bookkeeping account maintained by the Funds in your name. In order for you to enjoy the tax deferral, the payments due under the Agreement will be paid from the Funds' general assets, and you are considered a general unsecured creditor of the Funds; you may not transfer your right to receive payments under the Agreement to any other person, nor may you pledge that right to secure any debt or other obligation; finally, an election to defer must be made in writing before the first day of the calendar year for which the fees are earned (the "Election Date") and elections can be changed only prospectively, effective for the next calendar year.
An important change has been made to your Agreement to give you greater flexibility to select the time and method of payment of amounts that you defer: for amounts previously deferred and for future elections you now designate a specific Payment Date and payment method which generally may be changed with at least one year's advance notice.
PAYMENT DATE ELECTION
Deferred fees (and the income, gains and losses credited during the deferral period) generally will be paid out as elected by you in installments or a single sum in cash within 30 days of the Payment Date elected. (For payments in connection with your termination of service as a trustee, see below.)
Deferrals must be for a minimum two year period (unless your retirement date under the Retirement Plan is earlier). Thus, the Payment Date may be the first day of any calendar quarter that follows the second anniversary of the applicable Election Date or your retirement date. Thus, fees previously deferred and fees payable for the calendar year beginning January 1, 1997 may be deferred to the first day of any calendar quarter in any year from 1999.
EXTENDING A PAYMENT DATE
At least one year prior to any Payment Date, you may extend that Date, provided that the additional period of deferral is at least two years. You may make this change in Payment Date only once.
PAYMENT METHOD
The value of your deferrals (based on your election as to how your deferral account is to be considered invested) will be paid in cash, in one lump sum or in annual
installments (over a period not to exceed 10 years) as you select at the time you select your Payment Date. You may change this election, but the change will not be given effect unless it is made at least one year before your Payment Date or your ceasing to be a trustee (whichever occurs first). This one year requirement is waived in the case of your death (see Termination of Service, below).
TERMINATION OF SERVICE
Upon your death, your account under the Agreement will be paid out as elected by you in installments or in a single sum in cash as soon as practicable. Payment will be made to your designated Beneficiary or Beneficiaries or to your estate if there is no surviving Beneficiary.
Upon termination of your service as trustee for any reason other than death or your retirement (as defined in the Retirement Plan), your account will be paid to you as a single sum (or in installments if you had timely elected that method) in cash within three months following the end of the fiscal year in which you terminate, regardless of the Payment Dates you elected.
As revised September 26, 2002
APPENDIX A
For the purposes of the Deferred Compensation Agreement "AIM Funds" shall mean each of the regulated investment companies constituting classes or series of shares of the following entities:
AIM ADVISOR FUNDS
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL FUNDS, INC.
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SERIES TRUST
AIM SPECIAL OPPORTUNITIES FUNDS
AIM SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS CO.
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS CO.
EXHIBIT g(2)(c)
AMENDMENT NO. 2
SUB-CUSTODIAN AGREEMENT
WITH
JP MORGAN CHASE BANK
The Sub-Custodian Agreement with JP Morgan Chase Bank, formerly known as The Chase Manhattan Bank, successor-in-interest by merger to Chase Bank of Texas, N.A., dated September 9, 1994, as amended October 2, 1998 (collectively, the "Agreement"), is hereby amended as follows (terms used herein but not otherwise defined herein have the meaning ascribed them in the Agreement):
1) The Agreement is amended by inserting "001026118378" as the Bounced Check Account in the 5th line of Section 2.
2) Schedule A to the Agreement is hereby deleted in its entirety and replaced with the following:
AIM Advisor Funds
AIM Equity Funds
AIM Floating Rate Fund
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund
3) Schedule 2 to the Agreement is hereby deleted in its entirety and replaced with the following:
Authorized Officers Tony D. Green President Jack Bridge Senior Vice President Joseph H. Charpentier Senior Vice President Ira P. Cohen Senior Vice President Mary A. Corcoran Senior Vice President Sidney M. Dilgren Senior Vice President Kim T. McAuliffe Senior Vice President Linda L. Warriner Senior Vice President Helen G. Duskin Vice President Robert A. Frazer Vice President Charles A. McLaughlin Vice President Patrick D. Richoux Vice President Laura S. Stanley Vice President |
Authorized Representatives
Sherri Arbour
Debi Folse
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
JP MORGAN CHASE BANK
(as Subcustodian)
By: /s/ ILLEGIBLE
------------------------------------
Title: Vice President
---------------------------------
|
STATE STREET BANK AND TRUST COMPANY
(as Custodian)
By: /s/ ILLEGIBLE
------------------------------------
Title: Executive Vice President
---------------------------------
|
A I M FUND SERVICES, INC.
(as Transfer Agent)
By: /s/ KIM MCAULIFFE
------------------------------------
Title: Senior Vice President
---------------------------------
|
EACH OF THE FUNDS LISTED ON AMENDED
SCHEDULE A HERETO
By: /s/ ILLEGIBLE
------------------------------------
Title: President
---------------------------------
|
EXHIBIT h(2)(d)
AMENDMENT NO. 3
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated June 5, 2000, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM GROWTH SERIES
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Basic Value Fund June 5, 2000 AIM Euroland Growth Fund September 1, 2001 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 1, 2002
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
EXHIBIT h(2)(e)
AMENDMENT NO. 4
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated June 5, 2000, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM GROWTH SERIES
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Basic Value Fund June 5, 2000 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: September 23, 2002
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
AIM GROWTH SERIES
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
EXHIBIT j(1)
CONSENT OF COUNSEL
AIM GROWTH SERIES
We hereby consent to the use of our name and to the reference to our firm under the caption "Investment Advisory and Other Services - Other Service Providers - Counsel to the Trust" in the Statement of Additional Information for the retail and institutional classes of AIM Growth Series, which is included in Post-Effective Amendment No. 53 to the Registration Statement under the Securities Act of 1933, as amended (No. 2-57526), and Amendment No. 49 to the Registration Statement under the Investment Company Act of 1940, as amended (No. 811-2699), on Form N-1A of AIM Growth Series.
/s/ BALLARD SPAHR ANDREWS & INGERSOLL, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
April 23, 2003
|
EXHIBIT J (2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of our reports dated February 14, 2003, relating to the financial statements and financial highlights of AIM Growth Series, which appear in such Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Other Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP Houston, Texas April 24, 2003 |
EXHIBIT m(1)(a)
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A SHARES, CLASS C SHARES AND CLASS R SHARES)
SECTION 1. AIM Growth Series (the "Fund") on behalf of the series of the Shares of beneficial interest set forth in Appendix A attached hereto (the "Portfolios") may act as a distributor of the Class A shares, Class C shares and Class R shares of such Portfolios (the "Shares") of which the Fund is the issuer, pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur pursuant to the terms of this Master Distribution Plan expenses at the rates set forth in Appendix A per annum of the average daily net assets of the Fund attributable to the Shares, subject to any applicable limitations imposed from time to time by applicable rules of the National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Appendix A may be used to finance any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, expenses of organizing and conducting sales seminars, advertising programs, finders fees, printing of prospectuses and statements of additional information (and supplements thereto) and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature, overhead, supplemental payments to dealers and other institutions as asset-based sales charges. Amounts set forth in Appendix A may also be used to finance payments of service fees under a shareholder service arrangement to be established by A I M Distributors, Inc. ("Distributors") as the Fund's distributor in accordance with Section 4, and the costs of administering the Plan. To the extent that amounts paid hereunder are not used specifically to reimburse Distributors for any such expense, such amounts may be treated as compensation for Distributors' distribution-related services. All amounts expended pursuant to the Plan shall be paid to Distributors and are the legal obligation of the Fund and not of Distributors. That portion of the amounts paid under the Plan that is not paid to, or paid or advanced by Distributors to dealers or other institutions, for providing personal continuing shareholder service as a service fee pursuant to Section 4 shall be deemed an asset-based sales charge. The distribution agreement with any Distributor shall provide that the portion of the amounts set forth in Appendix A that is an asset based sales charge with respect to Class C Shares shall be deemed to be paid for services rendered by the Distributor or any Dealers in placing the Class C Shares, which services are fully performed upon the settlement of each sale of a Class C Share (or share of another portfolio from which the Class C Share derives). No provision of this Plan shall be interpreted to prohibit any payments by the Fund during periods when the Fund has suspended or otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in part for the implementation by Distributors of shareholder service arrangements with respect to the Shares. The maximum service fee paid to any service provider shall be twenty-five one-hundredths of one percent (0.25%) per annum of the average daily net assets of the Fund attributable to the Shares owned by the customers of such service provider.
(b) Pursuant to this program, Distributors may enter into agreements substantially in the form attached hereto as Exhibit A ("Service Agreements") with such broker-dealers ("Dealers") as may be selected from time to time by Distributors for the provision of distribution-related personal shareholder services in connection with the sale of Shares to the Dealers' clients and customers ("Customers") who may from time to time directly or beneficially own Shares. The distribution-related personal continuing shareholder services to be rendered by Dealers under the Service Agreements may include, but shall not be limited to, the following: (i) distributing sales literature; (ii) answering routine Customer inquiries concerning the Fund and the Shares; (iii) assisting Customers in changing dividend options, account designations and addresses, and in enrolling into any of several retirement plans offered in connection with the purchase of Shares; (iv) assisting in the establishment and maintenance of customer accounts and records, and in the processing of purchase and redemption transactions; (v) investing dividends and capital gains distributions automatically in Shares; and (vi) providing such other information and services as the Fund or the Customer may reasonably request.
(c) Distributors may also enter into Bank Shareholder Service Agreements substantially in the form attached hereto as Exhibit B ("Bank Agreements") with selected banks acting in an agency capacity for their customers ("Banks"). Banks acting in such capacity will provide some or all of the shareholder services to their customers as set forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Variable Group Annuity Contractholder Service Agreements substantially in the form attached hereto as Exhibit C ("Variable Contract Agreements") with selected insurance companies ("Companies") offering variable annuity contracts to employers as funding vehicles for retirement plans qualified under Section 401(a) of the Internal Revenue Code, where amounts contributed under such plans are invested pursuant to such variable annuity contracts in Shares of the Fund. The Companies receiving payments under such Variable Contract Agreements will provide specialized services to contractholders and plan participants, as set forth in the Variable Contract Agreements from time to time.
(e) Distributors may also enter into Agency Pricing Agreements substantially in the form attached hereto as Exhibit D ("Pricing Agreements") with selected retirement plan service providers acting in an agency capacity for their customers ("Retirement Plan Providers"). Retirement Plan Providers acting in such capacity will provide some or all of the shareholder services to their customers as set forth in the Pricing Agreements from time to time.
(f) Distributors may also enter into Shareholder Service Agreements substantially in the form attached hereto as Exhibit E ("Bank Trust Department Agreements and Brokers for Bank Trust Department Agreements") with selected bank trust departments and brokers for bank trust departments. Such bank trust departments and brokers for bank trust departments will provide some or all of the shareholder services to their customers as set forth in the Bank Trust Department Agreements and Brokers for Bank Trust Department Agreements from time to time.
(g) Distributors, as agent of the Portfolios may also enter into a Shareholder Service Agreement substantially in the form attached hereto as Exhibit F ("Agreement") with Distributors, acting as principal. Distributors, acting as principal will provide some or all of the shareholder services to Portfolio shareholders for which Distributors is the broker of record, as set forth in such Agreement.
SECTION 5. Any amendment to this Plan that requires the approval of the shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall become effective as to such Class upon the approval of such amendment by a "majority of the outstanding voting securities" (as defined in the 1940 Act) of such Class, provided that the Board of Trustees of the Fund has approved such amendment in accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements related to this Plan shall become effective immediately upon the receipt by the Fund of both (a) the affirmative vote of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a majority of those trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Dis-interested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreements. Notwithstanding the foregoing, no such amendment that requires the approval of the shareholders of a Class of a Fund shall become effective as to such Class until such amendment has been approved by the shareholders of such Class in accordance with the provisions of Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan shall continue in effect until June 30, 2003 and thereafter shall continue in effect so long as such continuance is specifically approved, at least annually, in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Trustees and the Board of Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made.
SECTION 9. This Plan may be terminated at any time by vote of a majority of the Dis-interested Trustees, or by vote of a majority of the outstanding voting securities of the Shares. If this Plan is terminated, the obligation of the Fund to make payments pursuant to this Plan will also cease and the Fund will not be required to make any payments beyond the termination date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time, without payment of any penalty, by vote of a majority of the Dis-interested Trustees or by a vote of the outstanding voting securities of the Fund attributable to the Shares, on not more than sixty (60) days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the amount of distribution expenses provided for in Section 2 hereof unless such amendment is approved in the manner provided in Section 5 hereof, and no material amendment to the Plan shall be made unless approved in the manner provided for in Section 6 hereof.
AIM GROWTH SERIES
(on behalf of its Class A Shares,
Class C Shares and Class R Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
-------------------------------- --------------------------------
Assistant Secretary President
|
Effective as of May 3, 1999, as amended and restated July 1, 1999, as amended as of September 1, 1999 and June 12, 2000.
Amended and restated for all Portfolios as of July 1, 2000, as amended as of September 10, 2001.
Amended and restated for all Portfolios as of June 3, 2002.
APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A SHARES, CLASS C SHARES AND CLASS R SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) as designated below, a Distribution Fee* determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio (or Class thereof).
MINIMUM
ASSET
FUND BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS A SHARES CHARGE FEE FEE
-------------- ------- ------- ---------
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Euroland Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Equity Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS C SHARES CHARGE FEE FEE
-------------- ------- ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Euroland Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS R SHARES CHARGE FEE FEE
-------------- ------- ------- ---------
AIM Basic Value Fund 0.25% 0.25% 0.50%
AIM Mid Cap Equity Fund 0.25% 0.25% 0.50%
AIM Small Cap Growth Fund 0.25% 0.25% 0.50%
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof).
EXHIBIT m(1)(b)
AMENDMENT NO. 1
THIRD AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
The Third Amended and Restated Master Distribution Plan (the "Plan"), dated as of June 3, 2002, pursuant to Rule 12b-1 of AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A SHARES, CLASS C SHARES AND CLASS R SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) as designated below, a Distribution Fee* determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio (or Class thereof).
PORTFOLIO MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS A SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Euroland Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS C SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Euroland Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS R SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.25% 0.25% 0.50%
AIM Small Cap Growth Fund 0.25% 0.25% 0.50%
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof)."
The Distributor will waive part or all of its Distribution Fee as to a Portfolio (or Class thereof) to the extent that the ordinary business expenses of the Portfolio exceed the expense limitation as to the Portfolio (if any) as contained in the Master Investment Advisory Agreement between the Company and A I M Advisors, Inc.
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: July 1, 2002
AIM GROWTH SERIES
(on behalf of its Class A Shares, Class C
Shares and Class R Shares)
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
EXHIBIT m(1)(c)
AMENDMENT NO. 2
THIRD AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
The Third Amended and Restated Master Distribution Plan (the "Plan"), dated as of June 3, 2002, pursuant to Rule 12b-1 of AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A SHARES, CLASS C SHARES AND CLASS R SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) as designated below, a Distribution Fee* determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio (or Class thereof).
PORTFOLIO MINIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS A SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS C SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
* The Distribution Fee is payable apart from the sales charge, if any, as stated in the current prospectus for the applicable Portfolio (or Class thereof)."
MAXIMUM MAXIMUM MAXIMUM
ASSET BASED SERVICE AGGREGATE
CLASS R SHARES SALES CHARGE FEE FEE
-------------- ------------ ------- ---------
AIM Basic Value Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.25% 0.25% 0.50%
AIM Small Cap Growth Fund 0.25% 0.25% 0.50%
|
The Distributor will waive part or all of its Distribution Fee as to a Portfolio (or Class thereof) to the extent that the ordinary business expenses of the Portfolio exceed the expense limitation as to the Portfolio (if any) as contained in the Master Investment Advisory Agreement between the Company and A I M Advisors, Inc."
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: September 23, 2002
AIM GROWTH SERIES
(on behalf of its Class A Shares,
Class C Shares and Class R Shares)
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
EXHIBIT m(2)(c)
AMENDMENT NO. 2
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The First Amended and Restated Master Distribution Plan (the "Plan"), dated as of December 31, 2000, pursuant to Rule 12b-1 of AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
MAXIMUM MAXIMUM MAXIMUM
ASSET-BASED SERVICE AGGREGATE
SALES CHARGE FEE FEE
------------ ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Euroland Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: July 1, 2002
AIM GROWTH SERIES
(on behalf of its Class B Shares)
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
EXHIBIT m(2)(d)
AMENDMENT NO. 3
TO THE FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The First Amended and Restated Master Distribution Plan (the "Plan"), dated as of December 31, 2000, pursuant to Rule 12b-1 of AIM Growth Series, a Delaware business trust, is hereby amended as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
MAXIMUM MAXIMUM MAXIMUM
ASSET-BASED SERVICE AGGREGATE
SALES CHARGE FEE FEE
------------ ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: September 23, 2002
AIM GROWTH SERIES
(on behalf of its Class B Shares)
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary Robert H. Graham
President
|
EXHIBIT m(6)
AGENCY PRICING AGREEMENT
(THE AIM FAMILY OF FUNDS")
This Agreement is entered into as of the __ of__________________, 2001, between ____________________________________ (the "Plan Provider") and A I M Distributors, Inc. (the "Distributor").
RECITAL
Plan Provider acts as a trustee and/or servicing agent for defined contribution plans and/or deferred compensation plans (the "Plans") and invests and reinvests such Plans' assets as specified by an investment advisor, sponsor or administrative committee of the Plan (a "Plan Representative") generally upon the direction of Plan beneficiaries (the "Participants").
Plan Provider and Distributor desire to facilitate the purchase and redemption of shares (the "Shares") of the funds listed on Exhibit A hereto which may be amended from time to time by Distributor (the "Fund" or "Funds"), registered investment companies distributed by Distributor, on behalf of the Plans, through one or more accounts (not to exceed one per Plan) in each Fund (individually an "Account" and collectively the "Accounts"), subject to the terms and conditions of this Agreement. Distributor shall, on behalf of the Funds, pay to Plan Provider a fee in accordance with Exhibit A hereto.
AGREEMENT
1. SERVICES
Plan Provider shall provide shareholder and administration services for
the Plans and/or their Participants, including, without limitation:
answering questions about the Funds; assisting in changing dividend
options, account designations and addresses; establishing and
maintaining shareholder accounts and records; and assisting in
processing purchase and redemption transactions (the "Services"). Plan
Provider shall comply with all applicable laws, rules and regulations,
including requirements regarding prospectus delivery and maintenance and
preservation of records. To the extent allowed by law, Plan Provider
shall provide Distributor with copies of all records that Distributor
may reasonably request. Distributor or its affiliate will recognize each
Plan as an unallocated account in each Fund, and will not maintain
separate accounts in each Fund for each Participant. Except to the
extent provided in Section 3, all Services performed by Plan Provider
shall be as an independent contractor and not as an employee or agent of
Distributor or any of the Funds. Plan Provider and Plan Representatives,
and not Distributor, shall take all necessary action so that the
transactions contemplated by this Agreement shall not be "Prohibited
Transactions" under section 406 of the Employee Retirement Income
Security Act of 1974, or section 4975 of the Internal Revenue Code.
2. PRICING INFORMATION
Each Fund or its designee will furnish Plan Provider on each business day that the New York Stock Exchange is open for business ("Business Day"), with (i) net asset value information as of the close of trading (currently 4:00 p.m. Eastern Time) on the New York Stock Exchange or as at such later times at which a Fund's net asset value is calculated as
07/02
specified in such Fund's prospectus ("Close of Trading"), (ii) dividend and capital gains information as it becomes available, and (iii) in the case of income Funds, the daily accrual or interest rate factor (mil rate). The Funds shall use their best efforts to provide such information to Plan Provider by 6:00 p.m. Central Time on the same Business Day.
Distributor or its affiliate will provide Plan Provider (a) daily confirmations of Account activity within five Business Days after each day on which a purchase or redemption of Shares is effected for the particular Account, (b) if requested by Plan Provider, quarterly statements detailing activity in each Account within fifteen Business Days after the end of each quarter, and (c) such other reports as may be reasonably requested by Plan Provider.
3. ORDERS AND SETTLEMENT
If Plan Provider receives instructions in proper form from Participants or Plan Representatives before the Close of Trading on a Business Day, Plan Provider will process such instructions that same evening. On the next Business Day, Plan Provider will transmit orders for net purchases or redemptions of Shares to Distributor or its designee by 9:00 a.m. Central Time and wire payment for net purchases by 2:00 p.m. Central Time. Distributor or its affiliate will wire payment for net redemptions on the Business Day following the day the order is executed for the Accounts. In doing so, Plan Provider will be considered the Funds' agent, and Shares will be purchased and redeemed as of the Business Day on which Plan Provider receives the instructions. Plan Provider will record time and date of receipt of instructions and will, upon request, provide such instructions and other records relating to the Services to Distributor's auditors. If Plan Provider receives instructions in proper form after the Close of Trading on a Business Day, Plan Provider will treat the instructions as if received on the next Business Day.
4. REPRESENTATIONS WITH RESPECT TO THE DISTRIBUTOR AND THE FUNDS
Plan Provider and its agents shall limit representations concerning a Fund or Shares to those contained in the then current prospectus of such Fund, in current sales literature furnished by Distributor to Plan Provider, in publicly available databases, such as those databases created by Standard & Poor's and Morningstar, and in current sales literature created by Plan Provider and submitted to and approved in writing by Distributor prior to its use.
5. USE OF NAMES
Plan Provider and its affiliates will not, without the prior written approval of Distributor, make public references to A I M Management Group Inc. or any of its subsidiaries, or to the Funds. For purposes of this provision, the public does not include Plan Providers' representatives who are actively engaged in promoting the Funds. Any brochure or other communication to the public that mentions the Funds shall be submitted to Distributor for written approval prior to use. Plan Provider shall provide copies of its regulatory filings that include any reference to A I M Management Group Inc. or its subsidiaries or the Funds to Distributor. If Plan Provider or its affiliates should make unauthorized references or representations, Plan Provider agrees to indemnify and hold harmless the Funds, A I M Management Group Inc. and its subsidiaries from any claims, losses, expenses or liability arising in any way out of or connected in any way with such references or representations.
6. TERMINATION
(a) This Agreement may be terminated with respect to any Fund at any time without any penalty by the vote of a majority of the directors of such Fund who are "disinterested directors", as that term is defined in the Investment Company Act of 1940, as amended (the "1940 Act"), or by a vote of a majority of the Fund's outstanding shares, on sixty (60) days' written notice. It will be terminated by any act which terminates either the Fund's Distribution Plan, or any related agreement thereunder, and in any event, it shall terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
(b) Either party may terminate this Agreement upon ninety (90) days' prior written notice to the other party at the address specified below.
7. INDEMNIFICATION
(a) Plan Provider agrees to indemnify and hold harmless the Distributor, its affiliates, the Funds, the Funds' investment advisors, and each of their directors, officers, employees, agents and each person, if any, who controls them within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), (the "Distributor Indemnitees") against any losses, claims, damages, liabilities or expenses to which a Distributor Indemnitee may become subject insofar as those losses, claims, damages, liabilities or expenses or actions in respect thereof, arise out of or are based upon (i) Plan Provider's negligence or willful misconduct in performing the Services, (ii) any breach by Plan Provider of any material provision of this Agreement, or (iii) any breach by Plan Provider of a representation, warranty or covenant made in this Agreement; and Plan Provider will reimburse the Distributor Indemnitee for any legal or other expenses reasonably incurred, as incurred, by them in connection with investigating or defending such loss, claim or action. This indemnity agreement will be in addition to any liability which Plan Provider may otherwise have.
(b) Distributor agrees to indemnify and hold harmless Plan Provider
and its affiliates, and each of its directors, officers,
employees, agents and each person, if any, who controls Plan
Provider within the meaning of the Securities Act (the "Plan
Provider Indemnitees") against any losses, claims, damages,
liabilities or expenses to which a Plan Provider Indemnitee may
become subject insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement or Prospectus of a Fund, or the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make statements therein not misleading,
(ii) any breach by Distributor of any material provision of this
Agreement, (iii) Distributor's negligence or willful misconduct
in carrying out its duties and responsibilities under this
Agreement, or (iv) any breach by Distributor of a representation,
warranty or covenant made in this Agreement; and Distributor will
reimburse the Plan Provider Indemnitees for any legal or other
expenses reasonably incurred, as incurred, by them, in connection
with investigating or defending any such loss, claim or action.
This indemnity agreement will be in addition to any liability
which Distributor may otherwise have.
(c) If any third party threatens to commence or commences any action for which one party (the "Indemnifying Party") may be required to indemnify another person
hereunder (the "Indemnified Party"), the Indemnified Party shall promptly give notice thereof to the Indemnifying Party. The Indemnifying Party shall be entitled, at its own expense and without limiting its obligations to indemnify the Indemnified Party, to assume control of the defense of such action with counsel selected by the Indemnifying Party which counsel shall be reasonably satisfactory to the Indemnified Party. If the Indemnifying Party assumes the control of the defense, the Indemnified Party may participate in the defense of such claim at its own expense. Without the prior written consent of the Indemnified Party, which consent shall not be withheld unreasonably, the Indemnifying Party may not settle or compromise the liability of the Indemnified Party in such action or consent to or permit the entry of any judgment in respect thereof unless in connection with such settlement, compromise or consent each Indemnified Party receives from such claimant an unconditional release from all liability in respect of such claim.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas applicable to agreements fully executed and to be performed therein.
9. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each party represents that it is free to enter into this Agreement and that by doing so it will not breach or otherwise impair any other agreement or understanding with any other person, corporation or other entity. Each party represents that it has full power and authority under applicable law, and has taken all action necessary to enter into and perform this Agreement and the person executing this Agreement on its behalf is duly authorized and empowered to execute and deliver this Agreement. Additionally, each party represents that this Agreement, when executed and delivered, shall constitute its valid, legal and binding obligation, enforceable in accordance with its terms.
Plan Provider further represents, warrants, and covenants that:
(a) it is registered as a transfer agent pursuant to Section 17A of the Securities Exchange Act of 1934, as amended (the "1934 Act"), or is not required to be registered as such;
(b) the arrangements provided for in this Agreement will be disclosed to the Plan Representatives; and
(c) it is registered as a broker-dealer under the 1934 Act or any applicable state securities laws, or, including as a result of entering into and performing the services set forth in this Agreement, is not required to be registered as such.
(d) it will ensure that either it, its affiliates or another person other than Distributor is the registered broker-dealer for any transaction made pursuant to this Agreement, that Distributor is not responsible for determining whether Shares are suitable investments for the participants, and that any such registered broker-dealer shall have the appropriate selling group agreement with Distributor in place at the time such transaction occurs. Further, Plan Provider will provide indemnification to Distributor or its affiliates for any breach of this subsection.
(e) it is a member of the National Securities Clearing Corporations ("NSCC") and has executed and filed the standard NSCC Fund/SERV Agreement with the NSCC and will abide by its terms and the applicable rules. Plan Provider further represents and warrants that it or an affiliate is a member of the NSCC and has executed and filed with the NSCC the standard NSCC Fund/SERV Agreement. Plan Provider further represents and warrants that it will abide by the NSCC Fund/SERV rules and agrees that it will perform its duties and obligations under this Agreement in accordance with the terms of the NSCC Fund/SERV Agreement except as otherwise specified in a writing signed by both parties.
Distributor further represents, warrants and covenants, that:
(a) it is registered as a broker-dealer under the 1934 Act and any applicable state securities laws; and
(b) the Funds' advisors are registered as investment advisors under the Investment Advisers Act of 1940, the Funds are registered as investment companies under the 1940 Act and Fund Shares are registered under the Securities Act.
10. MODIFICATION
This Agreement and Exhibit A may be amended at any time by Distributor without Plan Provider's consent by Distributor mailing a copy of an amendment to Plan Provider at the address set forth below. Such amendment shall become effective thirty (30) days from the date of mailing unless this Agreement is terminated by the Plan Provider within such thirty (30) days.
11. ASSIGNMENT
This Agreement shall not be assigned by a party hereto, without the prior written consent of the other parties hereto, except that a party may assign this Agreement to an affiliate having the same ultimate ownership as the assigning party without such consent.
12. SURVIVAL
The provisions of Sections 1, 5 and 7 shall survive termination of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly authorized officers as of the date first above written.
A I M DISTRIBUTORS, INC.
(DISTRIBUTOR)
07/02
EXHIBIT A
For the term of this Agreement, Distributor, or its affiliates, shall pay Plan Provider the following amounts for each of the following Funds with respect to the average daily net asset value of the Class A Shares of the Plans' balances for the prior quarter:
FUND ANNUAL FEE
---- ----------
AIM Advisor Funds (Class A Shares Only)
AIM International Core Equity Fund .25%
AIM Real Estate Fund .25%
AIM Equity Funds (Class A Shares Only)
AIM Aggressive Growth Fund .25%
AIM Blue Chip Fund .25%
AIM Capital Development Fund .25%
AIM Charter Fund .25%
AIM Constellation Fund .25%
AIM Dent Demographic Trends Fund .25%
AIM Emerging Growth Fund .25%
AIM Large Cap Basic Value Fund .25%
AIM Large Cap Core Equity Fund .25%
AIM Large Cap Growth Fund .25%
AIM Mid Cap Growth Fund .25%
AIM Weingarten Fund .25%
AIM Floating Rate Fund (Class C Shares Only) Up to .25%
AIM Funds Group (Class A Shares Only)
AIM Balanced Fund .25%
AIM Basic Balanced Fund .25%
AIM European Small Company Fund .25%
AIM Global Utilities Fund .25%
AIM International Emerging Growth Fund .25%
AIM Mid Cap Basic Value Fund .25%
AIM New Technology Fund .25%
AIM Premier Equity Fund .25%
AIM Premier Equity II Fund .25%
AIM Select Equity Fund .25%
AIM Small Cap Equity Fund .25%
AIM Worldwide Spectrum Fund .25%
|
11/01/02
AIM Growth Series (Class A Shares Only)
AIM Basic Value Fund .25%
AIM Mid Cap Core Equity Fund .25%
AIM Small Cap Growth Fund(1) .25%
AIM International Funds, Inc. (Class A Shares Only)
AIM Asia Pacific Growth Fund .25%
AIM European Growth Fund .25%
AIM Global Aggressive Growth Fund .25%
AIM Global Growth Fund .25%
AIM Global Income Fund .25%
AIM International Growth Fund .25%
AIM Investment Funds (Class A Shares Only)
AIM Developing Markets Fund .25%
AIM Global Energy Fund .25%
AIM Global Financial Services Fund .25%
AIM Global Health Care Fund .25%
AIM Global Science and Technology Fund .25%
AIM Libra Fund .25%
AIM Strategic Income Fund .25%
AIM Investment Securities Funds (Class A Shares (and Class A3 Shares of AIM
Limited Maturity Treasury Fund) Only)
AIM High Yield Fund II .25%
AIM Limited Maturity Treasury Fund(2) .15%
AIM High Yield Fund .25%
AIM Income Fund .25%
AIM Intermediate Government Fund .25%
AIM Municipal Bond Fund .25%
AIM Total Return Bond Fund .25%
AIM Series Trust (Class A Shares Only)
AIM Global Trends Fund .25%
AIM Special Opportunities Funds (Class A Shares Only)
AIM Opportunities I Fund .25%
AIM Opportunities II Fund .25%
AIM Opportunities III Fund .25%
|
Distributor or its affiliates shall calculate the amount of quarterly payment and shall deliver to Plan Provider a quarterly statement showing the calculation of the quarterly amounts payable to Plan Provider. Distributor reserves the right at any time to impose minimum fee payment requirements before any quarterly payments will be made to Plan Provider. Payment to Plan Provider shall occur within 30 days following the end of each quarter. All parties agree that the payments referred to herein are for record keeping and administrative services only and are not for legal, investment advisory or distribution services.
11/01/02
Minimum Payments: $50 (with respect to all Funds in the aggregate.)
11/01/02
EXHIBIT n
SECOND AMENDED AND RESTATED
MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS--Registered Trademark--
1. This Multiple Class Plan (the "Plan") adopted in accordance with Rule 18f-3 under the Act shall govern the terms and conditions under which the Funds may issue separate Classes of Shares representing interests in one or more Portfolios of each Fund.
2. Definitions. As used herein, the terms set forth below shall have the meanings ascribed to them below.
(a) Act -- Investment Company Act of 1940, as amended.
(b) AIM Cash Reserve Shares -- shall mean the AIM Cash Reserve Shares Class of AIM Money Market Fund, a Portfolio of AIM Investment Securities Funds.
(c) CDSC -- contingent deferred sales charge.
(d) CDSC Period -- the period of years following acquisition of Shares during which such Shares may be assessed a CDSC upon redemption.
(e) Class -- a class of Shares of a Fund representing an interest in a Portfolio.
(f) Class A Shares -- shall mean those Shares designated as Class A Shares in the Fund's organizing documents.
(g) Class A3 Shares -- shall mean those Shares designated as Class A3 Shares in the Fund's organizing documents.
(h) Class B Shares -- shall mean those Shares designated as Class B Shares in the Fund's organizing documents.
(i) Class C Shares -- shall mean those Shares designated as Class C Shares in the Fund's organizing documents.
(j) Class R Shares -- shall mean those Shares designated as Class R Shares in the Fund's organizing documents.
(k) Directors -- the directors or trustees of a Fund.
(l) Distribution Expenses -- expenses incurred in activities which are primarily intended to result in the distribution and sale of Shares as defined in a Plan of Distribution and/or agreements relating thereto.
(m) Distribution Fee -- a fee paid by a Fund to the Distributor to compensate the Distributor for Distribution Expenses.
(n) Distributor -- A I M Distributors, Inc. or Fund Management Company, as applicable.
(o) Fund -- those investment companies advised by A I M Advisors, Inc. which have adopted this Plan.
(p) Institutional Class Shares -- shall mean Shares of a Fund representing an interest in a Portfolio offered for sale to institutional customers as may be approved by the Directors from time to time and as set forth in the Fund's Prospectus.
(q) Plan of Distribution -- any plan adopted under Rule 12b-1 under the Act with respect to payment of a Distribution Fee and/or Service Fee.
(r) Portfolio -- a series of the Shares of a Fund constituting a separate investment portfolio of the Fund.
(s) Prospectus -- the then currently effective prospectus and statement of additional information of a Portfolio.
(t) Service Fee -- a fee paid to financial intermediaries for the ongoing provision of personal services to Fund shareholders and/or the maintenance of shareholder accounts.
(u) Share -- a share of common stock or beneficial interest in a Fund, as applicable.
3. Allocation of Income and Expenses.
(a) Distribution Fees and Service Fees -- Each Class shall bear directly any and all Distribution Fees and/or Service Fees payable by such Class pursuant to a Plan of Distribution adopted by the Fund with respect to such Class.
(b) Transfer Agency and Shareholder Recordkeeping Fees -- Each Class shall bear directly the transfer agency fees and expenses and other shareholder recordkeeping fees and expenses payable by that Class pursuant to a Transfer Agency and Service Agreement adopted by the Fund with respect to such Class.
(c) Allocation of Other Expenses -- Each Class shall bear proportionately all other expenses incurred by a Portfolio based on the relative net assets attributable to each such Class.
(d) Allocation of Income, Gains and Losses -- Except to the extent provided in the following sentence, each Portfolio will allocate income and realized and unrealized capital gains and losses to a Class based on the relative net assets of each Class. Notwithstanding the foregoing, each Portfolio that declares dividends on a daily basis will allocate income on the basis of settled Shares.
(e) Waiver and Reimbursement of Expenses -- A Portfolio's adviser, underwriter or any other provider of services to the Portfolio may waive or reimburse the expenses of a particular Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and servicing arrangements identified below will apply for the following Classes offered by a Fund with respect to a Portfolio. The provisions of the Fund's Prospectus describing the distribution and servicing arrangements in detail are incorporated herein by this reference.
(a) Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to time
by the Directors and set forth in the Fund's Prospectus, which
sales charge may be reduced or eliminated for certain money
market fund shares, for larger purchases, under a combined
purchase privilege, under a right of accumulation, under a letter
of intent or for certain categories of purchasers as permitted by
Section 22(d) of the Act and as set forth in the Fund's
Prospectus. Class A Shares that are not subject to a front-end
sales charge as a result of the foregoing shall be subject to a
CDSC for the CDSC Period set forth in Section 5(a) of this Plan
if so provided in the Fund's Prospectus. The offering price of
Shares subject to a front-end sales charge shall be computed in
accordance with Rule 22c-1 and Section 22(d) of the Act and the
rules and regulations thereunder. Class A Shares shall be subject
to ongoing Service Fees and/or Distribution Fees approved from
time to time by the Directors and set forth in the Fund's
Prospectus.
(b) Class A3 Shares. Class A3 Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
(c) Class B Shares. Class B Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in
Section 5(b), (iii) subject to ongoing Service Fees and/or
Distribution Fees approved from time to time by the Directors and
set forth in the Fund's Prospectus, and (iv) converted to Class A
Shares eight years from the end of the calendar month in which
the shareholder's order to purchase was accepted, as set forth in
the Fund's Prospectus.
Class B Shares of AIM Global Trends Funds acquired prior to June 1, 1998 which are continuously held in AIM Global Trends Fund shall convert to Class A Shares seven years from the end of the calendar month in which the shareholder's order to purchase was accepted, as set forth in the Fund's Prospectus.
Class B Shares of AIM Money Market Fund will convert to AIM Cash Reserve Shares of AIM Money Market Fund.
(d) Class C Shares. Class C Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in
Section 5(c), and (iii) subject to ongoing Service Fees and/or
Distribution Fees approved from time to time by the Directors and
set forth in the Fund's Prospectus.
(e) Institutional Class Shares. Institutional Class Shares shall be
(i) offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from time to
time by the Directors and as set forth in the Fund's
Prospectus, and (iii) may be subject to ongoing Service Fees and/or Distribution Fees as approved from time to time by the Directors and set forth in the Fund's Prospectus.
(f) Class R Shares. Class R Shares shall be (i) offered at net asset
value, (ii) subject to a CDSC for the CDSC Period set forth in
Section 5(d), and (iii) subject to on-going Service Fees and/or
Distribution Fees approved from time to time by the Directors and
set forth in the Fund's Prospectus.
(g) AIM Cash Reserve Shares. AIM Cash Reserve Shares shall be (i) offered at net asset value, and (ii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Directors and set forth in the Fund's Prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not incur a front-end sales charge, of certain AIM Cash Reserve Shares, Class C Shares and Class R Shares and of Class B Shares as follows:
(a) AIM Cash Reserve Shares acquired through exchange of Class A Shares of another Portfolio may be subject to a CDSC for the CDSC Period set forth in Section 5(b) of this Plan if so provided in the Fund's Prospectus.
(b) Class A Shares. The CDSC Period for Class A Shares shall be the period set forth in the Fund's Prospectus. The CDSC rate shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by this reference. No CDSC shall be imposed on Class A Shares unless so provided in a Fund's Prospectus.
(c) Class B Shares. The CDSC Period for the Class B Shares shall be six years. The CDSC rate for the Class B Shares shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by this reference.
(d) Class C Shares. The CDSC Period for the Class C Shares that are subject to a CDSC shall be one year. The CDSC rate for the Class C Shares that are subject to a CDSC shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by reference.
(e) Class R Shares. The CDSC Period for the Class R Shares that are subject to a CDSC shall be the period set forth in the Fund's Prospectus. The CDSC rate for the Class R Shares that are subject to a CDSC shall be as set forth in the Fund's Prospectus, the relevant portions of which are incorporated herein by reference.
(f) Method of Calculation. The CDSC shall be assessed on an amount equal to the lesser of the then current market value or the cost of the Shares being redeemed. No CDSC shall be imposed on increases in the net asset value of the Shares being redeemed above the initial purchase price. No CDSC shall be assessed on Shares derived from reinvestment of dividends or capital gains distributions. The order in which Shares are to be redeemed when not all of
such Shares would be subject to a CDSC shall be determined by the Distributor in accordance with the provisions of Rule 6c-10 under the Act.
(g) Waiver. The Distributor may in its discretion waive a CDSC otherwise due upon the redemption of Shares on terms disclosed in the Fund's Prospectus and, for the Class A Shares and AIM Cash Reserve Shares, as allowed under Rule 6c-10 under the Act.
(h) CDSC Computation. The CDSC payable upon redemption of AIM Cash Reserve Shares, Class A Shares, Class B Shares, Class C Shares, and Class R Shares [subject to a CDSC] shall be computed in the manner described in the Fund's Prospectus.
6. Exchange Privileges. Exchanges of Shares, except for Institutional Class Shares, shall be permitted between Funds as follows:
(a) Shares of a Fund generally may be exchanged for Shares of the same Class of another Fund, subject to such exceptions and such terms and limitations as are disclosed in the Fund's Prospectus.
(b) Shares of a Fund generally may not be exchanged for Shares of a different Class of that Fund or another Fund, subject to such exceptions and such terms and limitations as are disclosed in the Fund's Prospectus.
(c) Depending upon the Portfolio from which and into which an exchange is being made and when the shares were purchased, shares being acquired in an exchange may be acquired at their offering price, at their net asset value or by paying the difference in sales charges, as disclosed in the Fund's Prospectus.
7. Service Fees and Distribution Fees. The Service Fee and Distribution Fee applicable to any Class shall be those set forth in the Fund's Prospectus, relevant portions of which are incorporated herein by this reference. All other terms and conditions with respect to Service Fees and Distribution Fees shall be governed by the Plan of Distribution adopted by the Fund with respect to such fees and Rule 12b-1 of the Act.
8. Conversion of Class B Shares.
(a) Shares Received upon Reinvestment of Dividends and Distributions -- Shares purchased through the reinvestment of dividends and distributions paid on Shares subject to conversion shall be treated as if held in a separate sub-account. Each time any Shares in a Shareholder's account (other than Shares held in the sub-account) convert to Class A Shares, a proportionate number of Shares held in the sub-account shall also convert to Class A Shares.
(b) Conversions on Basis of Relative Net Asset Value -- All conversions shall be effected on the basis of the relative net asset values of the two Classes without the imposition of any sales load or other charge.
(c) Amendments to Plan of Distribution for Class A Shares -- If any amendment is proposed to the Plan of Distribution under which Service Fees and Distribution
Fees are paid with respect to Class A Shares of a Fund that would increase materially the amount to be borne by those Class A Shares, then no Class B Shares shall convert into Class A Shares of that Fund until the holders of Class B Shares of that Fund have also approved the proposed amendment. If the holders of such Class B Shares do not approve the proposed amendment, the Directors of the Fund and the Distributor shall take such action as is necessary to ensure that the Class voting against the amendment shall convert into another Class identical in all material respects to Class A Shares of the Fund as constituted prior to the amendment.
9. Effective Date. This Plan shall not take effect until a majority of the Directors of a Fund, including a majority of the Directors who are not interested persons of the Fund, shall find that the Plan, as proposed and including the expense allocations, is in the best interests of each Class individually and the Fund as a whole.
10. Amendments. This Plan may not be amended to materially change the provisions of this Plan unless such amendment is approved in the manner specified in Section 9 above.
11. Administration of Plan. This Plan shall be administered in compliance with all applicable provisions of the Act and all applicable rules promulgated under the Act, including but not limited to Rule 18f-3, Rule 6c-10 (with respect to the imposition of CDSCs upon the redemption of Shares) and Rule 11a-3 (with respect to exchange privileges among Shares).
Effective December 12, 2001 as amended and restated March 4, 2002 and as further amended and restated October 31, 2002.
EXHIBIT p(1)
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(AS LAST AMENDED SEPTEMBER 27, 2002)
WHEREAS, the members of the AIM Management Group are A I M Management Group Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and its wholly owned and indirect subsidiaries (individually and collectively referred to as "AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to AIM's investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as principal underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the transfer agent, dividend disbursing agent and shareholder processing agent for AIM's investment company clients; and
WHEREAS, the investment advisory business involves decisions and information which may have at least a temporary impact on the market price of securities, thus creating a potential for conflicts of interest between the persons engaged in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect to each portfolio under management and the interests of the client accounts and of the shareholders of AIM's investment company clients must take precedence over the personal interests of the employees of AIM, thus requiring a rigid adherence to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no intentional or inadvertent action is taken by an employee of AIM which is, or appears to be, adverse to the interests of AIM or any of its client accounts, including the defining of standards of behavior for such employees, while at the same time avoiding unnecessary interference with the privacy or personal freedom of such employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the Code") on May 1, 1981, and adopted amendments thereto in January 1989, October 1989, April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and now deem it advisable to update and revise said Code in light of new investment company products developed by AIM and changing circumstances in the securities markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM Advisors hereby adopt the following revised Code pursuant to the provisions of Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act"), with the intention that certain provisions of the Code shall become applicable to the officers, directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers, directors and employees (as hereinafter designated) of AIM. Unless otherwise indicated, the term "employee" as used herein means: (i) all officers, directors and employees of AIM Advisors and its wholly owned and indirect subsidiaries and (ii) officers, directors and employees of AIM Management who
have an active part in the management, portfolio selection, underwriting or shareholder functions with respect to AIM's investment company clients or provide one or more similar services for AIM's non-investment company clients. The term "employee" does not include directors of AIM Management who do not maintain an office at the home office of AIM Management and who do not regularly obtain information concerning the investment recommendations or decisions made by AIM on behalf of client accounts ("independent directors").
B. The Code shall also apply to any person or entity appointed as a
sub-advisor for an AIM investment company client account unless such
person or entity has adopted a code of ethics in compliance with
Section 17(j) of the 1940 Act; or, in the event that such person or
entity is domiciled outside of the United States, has adopted
employee standards of conduct that provide equivalent protections to
AIM's client accounts. In performing sub-advisory services, such
person or entity will be subject to the direction and supervision of
AIM, and subject to the policies and control of the Boards of
Directors/Trustees of the respective AIM investment company
client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a Code of Ethics Committee ("Committee"). The Committee shall have the responsibility for interpreting the provisions of the Code, for adopting and implementing Procedures for the enforcement of the provisions of the Code, and for determining whether a violation of the provisions of the Code, or of any such related Procedures has occurred. The Committee will appoint an officer to monitor personal investment activity by "Covered Persons" (as defined in the Procedures adopted hereunder), both before and after any trade occurs and to prepare periodic and annual reports, conduct education seminars and obtain employee certifications as deemed appropriate. In the event of a finding that a violation has occurred requiring significant remedial action, the Committee shall take such action as it deems appropriate on the imposition of sanctions or initiation of disgorgement proceedings. The Committee shall also make recommendations and submit reports to the Boards of Directors/Trustees of AIM's investment company clients.
B. If a sub-advisor has adopted a code of ethics in accordance with
Section 17(j) of the 1940 Act, then pursuant to a sub-advisory
agreement with AIM, it shall be the duty of such sub-advisor to
furnish AIM with a copy of the following:
o code of ethics and related procedures of the sub-advisor, and a statement as to its employees' compliance therewith;
o any statement or policy on insider trading adopted pursuant to
Section 204A under the 1940 Act; and the procedures designed to
prevent the misuse of material non-public information by any
person associated with such sub-advisor; and
o such other information as may reasonably be necessary for AIM to report to the Boards of Directors/Trustees of its investment company client account(s) as to such sub-advisor's adherence to the Boards' policies and controls referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out the intent of the Code. Among other things, the Procedures require certain new employees to complete an Asset Disclosure Form, a Brokerage Accounts Listing Form and such other forms as deemed appropriate by the Committee. Such Procedures are hereby incorporated into the Code and are made a part of the Code. Therefore, a violation of the Procedures shall be deemed a violation of the Code itself.
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each employee shall have and maintain knowledge of and shall comply strictly with all applicable federal and state laws and all rules and regulations of any governmental agency or self-regulatory organization governing his/her actions as an employee.
B. Each employee shall comply with all laws and regulations, and AIM's prohibition against insider trading. Trading on or communicating material non-public information, or "inside information", of any sort, whether obtained in the course of research activities, through a client relationship or otherwise, is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines established by AIM to ensure compliance with applicable federal and state laws and regulations of governmental agencies and self-regulatory organizations. No employee shall knowingly participate in, assist, or condone any act in violation of any statute or regulation governing AIM or any act that would violate any provision of this Code, or of the Procedures adopted hereunder.
D. Each employee shall have and maintain knowledge of and shall comply with the provisions of this Code and any Procedures adopted hereunder.
E. Each employee having supervisory responsibility shall exercise reasonable supervision over employees subject to his/her control, with a view to preventing any violation by such persons of applicable statutes or regulations, AIM's corporate procedures, or the provisions of the Code, or the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of applicable statutes, regulations or provisions of the Code or of any Procedures adopted hereunder has occurred shall immediately report such evidence to the Chief Compliance Officer of AIM. Such action by the employee will remain confidential, unless the employee waives confidentiality or federal or state authorities compel disclosure. Failure to report such evidence may result in disciplinary proceedings and may include sanctions as set forth in Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the highest ethical and fiduciary standards. They shall avoid any action, whether for personal profit or otherwise, that results in an actual or potential conflict of interest with AIM or its client accounts, or which may be otherwise detrimental to the interests of the members of AIM or its client accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary obligation to clients of AIM, and shall not deprive any client account of an investment opportunity in order to personally benefit from that opportunity.
C. Without the knowledge and approval of the Ethics Committee of AIM Management, employees shall not engage in a business activity or practice for compensation in competition with the members of AIM. Each employee, who is deemed to be a "Covered Person" as defined in the
Procedures adopted hereunder, shall obtain the written approval of the Ethics Committee to participate on a board of directors/trustees of any of the following organizations:
o publicly traded company, partnership or trust;
o hospital or philanthropic institution;*
o local or state municipal authority;* and/or
o charitable organization.*
* These restrictions relate to organizations that have or intend to raise proceeds in a public securities offering.
In the relatively small number of instances in which board approval is authorized, investment personnel serving as directors shall be isolated from those making investment decisions through AIM's "Chinese Wall" Procedures.
D. Each employee, in making an investment recommendation or taking any investment action, shall exercise diligence and thoroughness, and shall have a reasonable and adequate basis for any such recommendation or action.
E. Each employee shall not attempt to improperly influence for such person's personal benefit any investment strategy to be followed or investment action to be taken by the members of AIM for its client accounts.
F. Each employee shall not improperly use for such person's personal benefit any knowledge, whether obtained through such person's relationship with AIM or otherwise, of any investment recommendation made or to be made, or of any investment action taken or to be taken by AIM for its client accounts.
G. Employees shall not disclose any non-public information relating to a client account's portfolio or transactions or to the investment recommendations of AIM, nor shall any employee disclose any non-public information relating to the business or operations of the members of AIM, unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a broker/dealer or other vendor who transacts business with AIM or its client accounts, any gifts, gratuities or other things of more than de minimis value or significance that their acceptance might reasonably be expected to interfere with or influence the exercise of independent and objective judgment in carrying out such person's duties or otherwise gives the appearance of a possible impropriety. For this purpose, gifts, gratuities and other things of value shall not include unsolicited entertainment so long as such unsolicited entertainment is not so frequent or extensive as to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of AIM shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest in an initial public offering ("IPO") or on behalf of any person, entity or organization that is not an AIM client. All other employees shall not acquire securities for an account for which he/she has a direct or indirect beneficial interest offered in an IPO or on behalf of any person, entity or organization that is not an AIM client account except in those circumstances where different amounts of such offerings are specified for different investor types (e.g., private investors and institutional investors) and such transaction has been pre-cleared by the Compliance Office.
J. All personal securities transactions by employees must be conducted consistent with this Code and the Procedures adopted hereunder, and in such a manner as to avoid any actual or potential conflicts of interest or any abuse of such employee's position of trust and responsibility. Unless an exemption is available, employees who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, shall pre-clear all personal securities transactions in securities in accordance with the Procedures adopted hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, (or registered representative and/or principal of AIM), shall refrain from engaging in personal securities transactions in connection with a security that is not registered under Section 12 of the Securities Act of 1933 (i.e., a private placement security) unless such transaction has been pre-approved by the Chief Compliance Officer or the Director of Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in the Procedures adopted hereunder, may not engage in a transaction in connection with the purchase or sale of a security within seven calendar days before and after an AIM investment company client trades in that same (or equivalent) security unless the de minimis exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined in the Procedures adopted hereunder, may not purchase and voluntarily sell, or sell and voluntarily purchase the same (or equivalent) securities of the same issuer within 60 calendar days unless such employee complies with the disgorgement procedures adopted by the Code of Ethics Committee. Subject to certain limited exceptions set forth in the related Procedures, any transaction under this provision may result in disgorgement proceedings for any profits received in connection with such transaction by such employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures adopted hereunder may be subject to sanctions, which may include, among other things, restrictions on such person's personal securities transactions; a letter of admonition, education or formal censure; fines, suspension, re-assignment, demotion or termination of employment; or other significant remedial action. Employees may also be subject to disgorgement proceedings for transactions in securities that are inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every situation in which choices and decisions must be made, because other company policies, practices and procedures (as well as good common sense) and good business judgment also apply. Every person subject to this Code should read and understand these documents thoroughly. They present important rules of conduct and operating controls for all employees. Employees are also expected to present questions to the attention of their supervisors and to the Chief Compliance Officer (or designee) and to report suspected violations as specified in these documents.
For the Boards of Directors:
The AIM Management Group and its
subsidiaries
by: /s/ Bob Graham
-----------------------------------
Bob Graham
|