As filed with the Securities and Exchange Commission on August 31, 2004
1933 Act Registration No. 33-19338
1940 Act Registration No. 811-05426
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 67 X
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and/or
(Check appropriate box or boxes.)
Robert H. Graham
11 Greenway Plaza, Suite 100
Houston, Texas 77046
--------------------
(Name and Address of Agent of Service)
Copy to:
Joel R. Messina 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
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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:
AIM TRIMARK FUND
PROSPECTUS
MARCH 1, 2004 AS REVISED NOVEMBER 1, 2004
AIM Trimark 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.
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ FEE TABLE AND EXPENSE EXAMPLE 3 ------------------------------------------------------ Fee Table 3 Expense Example 3 FUND MANAGEMENT 4 ------------------------------------------------------ The Advisors 4 Advisor Compensation 4 Portfolio Managers 4 Prior Performance of the Subadvisor 4 OTHER INFORMATION 6 ------------------------------------------------------ Sales Charges 6 Dividends and Distributions 6 FINANCIAL HIGHLIGHTS 7 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Tools Used to Combat Excessive Short-Term Trading Activity A-4 Purchasing Shares A-5 Redeeming Shares A-6 Exchanging Shares A-10 Pricing of Shares A-12 Taxes A-13 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, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a service mark of A I M Management Group Inc. and AIM Funds Management 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 generally by investing, normally, at least 75% of its net assets in marketable equity securities of medium- and large-sized companies, including convertible securities, of domestic issuers and foreign issuers. The fund will normally invest in the securities of companies located in at least three countries, including the United States.
The fund emphasizes investment in companies in developed countries such as the United States, the countries of Western Europe and certain countries in the Pacific Basin. The fund may also invest in companies located in developing countries, i.e., those that are in the initial stages of their industrial cycles.
The fund may invest up to 10% of its total assets in fixed-income securities such as investment-grade debt securities, longer-term U.S. Government securities and high-quality money market investments. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents such as U.S. Government agency discount notes, or shares of affiliated money market funds.
Under normal conditions, the top ten holdings may comprise up to 50% of the fund's total assets. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities, the portfolio managers seek to identify companies that are both attractively priced relative to their prospective earnings and cash flow, and have strong long-term growth prospects. In evaluating companies, the portfolio managers emphasize several factors such as the quality of the company's management team, their commitment to securing a competitive advantage, and the company's sustainable growth potential. The portfolio managers typically consider whether to sell a security in any of four circumstances: 1) a more compelling investment opportunity exists, 2) the full value of the investment is deemed to have been realized, 3) there has been a fundamental negative change in management strategy of the company, or 4) there has been a fundamental negative change in competitive environment.
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.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
Because a large percentage of the fund's assets may be invested in a limited number of securities, a change in the value of these
securities could significantly affect the value of your investment in the fund.
The fund may participate in the initial public offering (IPO) market in some market cycles. Because of the fund's small asset base, any investment the fund may make in IPOs may significantly affect the fund's total return. 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.
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.
PERFORMANCE INFORMATION
Securities and Exchange Commission ("SEC") rules do not allow us to provide a bar chart and performance table for funds that do not have at least a full calendar year of performance.
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) Redemption/Exchange Fee (as a percentage of amount redeemed/ exchanged) 2.00%(4) None None None ------------------------------------------------------------------------------------------ |
ANNUAL FUND OPERATING EXPENSES(5) ---------------------------------------------------------------------------------------- (expenses that are deducted from fund assets) CLASS A CLASS B CLASS C CLASS R ---------------------------------------------------------------------------------------- Management Fees 0.85% 0.85% 0.85% 0.85% Distribution and/or Service (12b-1) Fees 0.35 1.00 1.00 0.50 Other Expenses(6) 0.73 0.73 0.73 0.73 Total Annual Fund Operating Expenses 1.93 2.58 2.58 2.08 ---------------------------------------------------------------------------------------- |
(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) If you are a retirement plan participant and you buy $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) You may be charged a 2.00% fee on redemptions or exchanges of Class A shares
held 30 days or less. See "Shareholder Information -- Redeeming
Shares -- Redemption/Exchange Fees" for more information.
(5) There is no guarantee that actual expenses will be the same as those shown
in the table.
(6) Other Expenses are based on estimated amounts 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
-----------------------------------------------------------
Class A $735 $1,123
Class B 761 1,102
Class C 361 802
Class R 211 652
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS
-----------------------------------------------------------
Class A $735 $1,123
Class B 261 802
Class C 261 802
Class R 211 652
-----------------------------------------------------------
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THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and manages the investment operations of the fund and has agreed to perform or arrange for the performance of the fund's day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM Funds Management Inc. (the subadvisor) is located at 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. The subadvisor is responsible for the fund's day- to-day management, including the fund's investment decisions and the execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976 and the subadvisor has acted as an investment advisor manager since 1981. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of 0.85% of the first $1 billion of the average daily net assets and 0.80% of the average daily net assets over $1 billion.
PORTFOLIO MANAGERS
The subadvisor 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
- Tye Bousada (lead manager), Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1999. From 1996 to 1999, he was an investment analyst and portfolio manager with Ontario Teachers' Pension Plan Board.
- Dana Love, Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the subadvisor and/or its affiliates since 1999. From 1997 to 1998, he was a full-time student.
More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
PRIOR PERFORMANCE OF THE SUBADVISOR
In addition to acting as subadviser to the fund, the subadvisor manages other investment portfolios with investment objectives, policies, strategies and risks that are substantially similar to the fund. On the following page, you will find information about the prior performance of the AIM Trimark Composite (the Composite) and separately the Trimark Fund and the Trimark Select Growth Fund, two Canadian mutual fund trusts (the Canadian Funds) that make up the Composite.
PERFORMANCE INFORMATION
The performance information provided is organized into columns. The first column shows the United States Dollar Performance of the Composite which is the asset-weighted performance of the Canadian Funds that make up the Composite calculated in United States Dollars. The next two columns show the performance of each of the underlying Canadian Funds that make up the Composite calculated in United States Dollars. The United States Dollar Performance reflects the performance that a U.S. investor would have received based on conversion of currency (using exchange rates published by the Federal Reserve Bank of New York) between the Canadian Dollar and the United States Dollar. The fourth column shows the performance of the MSCI World Index in United States Dollars which includes reinvestment of dividends and distributions. The MSCI World Index is a broad based securities market index representative of global developed equity markets.
The fifth column shows the Canadian Dollar Performance of the Composite which is the asset-weighted performance of the Canadian Funds calculated in Canadian Dollars. The Canadian Dollar Performance reflects the actual performance achieved by the Canadian Funds that make up the Composite. The next two columns show the performance of each of the underlying Canadian Funds that make up the Composite calculated in Canadian Dollars. The last column shows the performance of the MSCI World Index in Canadian Dollars which includes reinvestment of dividends and distributions.
COMPOSITE AND CANADIAN FUNDS PERFORMANCE CALCULATION
The Composite consists of the Canadian Funds' performance combined on an asset weighted basis. The Composite and the Canadian Funds are not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the Investment Company Act of 1940 and the U.S. Internal Revenue Code, which, if applicable, may have adversely affected the performance results of the Canadian Funds and the Composite. The Composite and the Canadian Funds are also not subject to the same level of expenses to which the fund is subject. The Composite and the Canadian Funds are not available to U.S. investors.
Calendar year Composite returns are calculated by time and asset weighting and reflect compounded monthly returns for all twelve months, using the beginning-of-month and end-of-month market prices either in United States Dollars (for the U.S. Dollar performance) or in Canadian Dollars (for the Canadian Dollar performance). The relevant net asset values are converted from Canadian Dollars to United States Dollars by applying the effective currency exchange rate (published by the Federal Reserve Bank of New York) at the beginning and the end of each month to the Canadian Dollar net asset values. Average annual total returns are computed by compounding calculated monthly returns for the respective time periods. An average annual total return reflects the compounded annual rate of return that would have produced the same cumulative total return if the performance had been constant over the entire period. Because average annual returns tend to even out variations, investors should recognize that such returns are not the same as actual year-by-year results.
OTHER IMPORTANT INFORMATION
The performance of the Composite and Canadian Funds do not represent the past performance of the fund and are not an indication of the future performance of the fund. The future performance of the fund may be better or worse than the future performance of the Composite and Canadian Funds due to, among other things, differences in portfolio holdings, sales charges, expenses, asset sizes, and cash flows. Also, you may experience different investment results depending on different currency conversion rates in the future.
The Composite and Canadian Funds performance data shown below includes reinvestment of all dividends, interest and income, realized and unrealized gains or losses and is net of applicable investment advisory fees, brokerage commissions and execution costs, custodial fees and any applicable foreign withholding taxes, without provision for federal and state income taxes, if any. The Composite does not include sales loads applicable to the Canadian Funds comprising the Composite.
CALENDAR YEAR ANNUAL TOTAL RETURNS (%)
TRIMARK TRIMARK
SELECT SELECT
TRIMARK GROWTH MSCI WORLD TRIMARK GROWTH MSCI WORLD
COMPOSITE(1) FUND(2) FUND(3) INDEX(4) COMPOSITE(1) FUND(2) FUND(3) INDEX(4)
YEAR (AS OF 12/31) (U.S. $) (U.S. $) (U.S. $) (U.S. $) (CANADIAN $) (CANADIAN $) (CANADIAN $) (CANADIAN $)
------------------ ------------ -------- -------- ---------- ------------ ------------ ------------ ------------
1994 N/A 8.96% 7.59% 5.08% N/A 14.93% 13.47% 11.32%
1995 N/A 19.83% 17.29% 20.72% N/A 16.66% 14.23% 17.38%
1996 13.77% 14.24% 13.51% 13.48% 14.26% 14.71% 14.02% 14.04%
1997 8.98% 11.08% 7.93% 15.76% 13.75% 16.00% 12.62% 20.86%
1998 -1.78% -0.99% -2.16% 24.34% 5.60% 6.41% 5.21% 33.46%
1999 23.15% 22.75% 23.33% 24.93% 15.84% 15.51% 15.99% 18.05%
2000 7.25% 8.59% 6.69% -13.18% 11.26% 12.63% 10.69% -10.15%
2001 3.65% 3.82% 3.57% -16.82% 9.94% 10.12% 9.85% -11.60%
2002 -4.97% -4.47% -5.20% -19.89% -6.08% -5.59% -6.31% -20.71%
2003 30.63% 31.08% 30.41% 33.11% 7.32% 7.68% 7.13% 8.88%
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The Composite year-to-date total return as of July 31, 2004 was -0.89% (U.S. $) and 1.90% (Canadian $).
Trimark Fund's Series SC year-to-date total return as of July 31, 2004 was -0.65% (U.S. $) and 2.14% (Canadian $).
Trimark Select Growth Fund's Series A year-to-date total return as of July 31, 2004 was -1.03% (U.S. $) and 1.75% (Canadian $).
(1) Does not reflect the sales loads applicable to the Canadian Funds (Trimark Fund, Series SC and Trimark Select Growth Fund, Series A) comprising the Composite.
(2) The information shown is for Series SC of Trimark Fund and does not reflect the sales loads applicable to such series. If it did, the annual total returns shown would be lower. Trimark Fund is not available to U.S. investors.
(3) The information shown is for Series A of Trimark Select Growth Fund and does not reflect the sales loads applicable to such series. If it did, the annual total returns shown would be lower. Trimark Select Growth Fund is not available to U.S. investors.
(4) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. This index does not incur fees, expenses or taxes and cannot be purchased directly by investors.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED
DECEMBER 31, 2003:
TRIMARK TRIMARK
SELECT SELECT
TRIMARK GROWTH MSCI WORLD TRIMARK GROWTH MSCI WORLD
COMPOSITE(1) FUND(2) FUND(3) INDEX(4) COMPOSITE(1) FUND(2) FUND(3) INDEX(4)
(U.S. $) (U.S. $) (U.S. $) (U.S. $) (CANADIAN $) (CANADIAN $) (CANADIAN $) (CANADIAN $)
------------ -------- -------- ---------- ------------ ------------ ------------ ------------
1 Year 30.63% 24.53% 23.89% 33.11% 7.32% 2.30% 1.78% 8.88%
3 Years 8.77% 7.29% 6.75% -3.92% 3.48% 2.08% 1.56% -8.62%
5 Years 11.19% 10.48% 9.86% -0.77% 7.39% 6.71% 6.10% -4.14%
8 Years 9.52% 9.51% 8.49% 5.81% 8.78% 8.77% 7.75% 5.10%
10 Years N/A 10.45% 9.24% 7.14% N/A 10.14% 8.94% 6.88%
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(1) Does not reflect the sales loads applicable to the Canadian Funds (Trimark Fund, Series SC and Trimark Select Growth Fund, Series A) comprising the Composite.
(2) The information shown is for Series SC of the Trimark Fund. The information reflects the maximum front-end sales load applicable to Series SC. The Trimark Fund is not available to US.
(3) The information shown is for Series A of the Trimark Select Growth Fund. The
information reflects the maximum front-end sales load applicable to Series
A. The Trimark Select Growth Fund is not available to US investors.
(4) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. This index does not incur fees, expenses or taxes and cannot be purchased directly by investors.
SALES CHARGES
Purchases of Class A shares of AIM Trimark 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.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
The information, along with the fund's financial statements, is included in the fund's semi-annual report, which is available upon request.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30, 2004
----------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.54
================================================================================
Total from investment operations 0.51
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.51
________________________________________________________________________________
================================================================================
Total return(b) 5.10%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,566
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.25%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 5.78%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (0.65)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $3,252,018.
(d) Not annualized for periods of less than one year.
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30, 2004
----------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
==============================================================================
Total from investment operations 0.48
==============================================================================
Redemption fees added to shares of beneficial interest 0.00
==============================================================================
Net asset value, end of period $10.48
______________________________________________________________________________
==============================================================================
Total return(b) 4.80%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,616
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 22%
______________________________________________________________________________
==============================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $1,050,035.
(d) Not annualized for periods of less than one year.
FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30, 2004
----------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
==============================================================================
Total from investment operations 0.48
==============================================================================
Redemption fees added to shares of beneficial interest 0.00
==============================================================================
Net asset value, end of period $10.48
______________________________________________________________________________
==============================================================================
Total return(b) 4.80%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,220
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 22%
______________________________________________________________________________
==============================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Does not include sales charges and is not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $904,143.
(d) Not annualized for periods of less than one year.
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-------------
Net asset value, beginning of period $10.51
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --
---------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
===========================================================================
Total from investment operations --
===========================================================================
Net asset value, end of period $10.51
___________________________________________________________________________
===========================================================================
Total return --
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
---------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
===========================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________
===========================================================================
Portfolio turnover rate(a) 22%
___________________________________________________________________________
===========================================================================
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(a) Not annualized for periods less than one year.
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(4) CLASS C CLASS R INVESTOR CLASS
----------------------------------------------------------------------------------------------------------------------------
- Initial sales - No initial sales - No initial sales - No initial sales - No initial sales - No initial sales
charge charge charge charge charge charge
- Reduced or waived - No contingent - Contingent - Contingent - Generally, no - No contingent
initial sales deferred sales deferred sales deferred sales contingent deferred sales
charge for charge charge on charge on deferred sales charge
certain redemptions redemptions charge(2)
purchases(2,3) within six years within one
year(6)
- Generally, lower - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of - 12b-1 fee of
distribution and 0.35% 1.00% 1.00% 0.50% 0.25%(7)
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 - Does not convert
to Class A shares A shares at the to Class A shares 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(5)
- Generally more - Generally more - Purchase orders - Generally more - Generally, only - Closed to new
appropriate for appropriate for limited to appropriate for available to the investors, except
long-term short- term amounts less than short- term following types as described in
investors investors $100,000 investors of retirement the "Purchasing
plans: (i) all Shares -- Grandfathered
section 401 and Investors"
457 plans, (ii) section of your
section 403 plans prospectus
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) Effective September 30, 2003, Class B shares will not be made available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code. These plans include 401(k) plans (including AIM Solo 401(k) plans), money purchase pension plans and profit sharing plans. Plans that have existing accounts invested in Class B shares will continue to be allowed to make additional purchases.
(5) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares. AIM Global Equity 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.
(6) A contingent deferred sales charge (CDSC) does not apply to redemption of Class C shares of AIM Short Term Bond Fund unless you exchange Class C shares of another AIM fund that are subject to a CDSC into AIM Short Term Bond Fund.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares and AIM Money Market Fund and AIM Tax-Exempt Cash Fund with respect to their Investor Class 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
MCF--04/04
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 (except AIM Short Term Bond Fund) 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.
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.
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
------------------------------------------------------------------------------
|
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
------------------------------------------------------------------------------
|
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
------------------------------------------------------------------------------
Less than $ 100,000 2.50% 2.56%
$100,000 but less than $ 250,000 2.00 2.04
$250,000 but less than $ 500,000 1.50 1.52
$500,000 but less than $1,000,000 1.25 1.27
------------------------------------------------------------------------------
|
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.
You will not pay an initial sales charge or a CDSC on Investor Class shares of any AIM 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 AIM funds and AIM Short Term Bond Fund 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 currently own Class A shares of a Category I, II or III AIM fund or AIM Short Term Bond Fund and make additional purchases (through October 30, 2002 for Category III AIM 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 AIM fund and AIM Short Term Bond Fund shares, and a 12-month, 0.25% CDSC for Category III AIM fund shares). The CDSC for Category III AIM 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. 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.
MCF--04/04
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 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 and Investor Class shares of any AIM or INVESCO 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 of an AIM or INVESCO fund
with AIM and/or INVESCO fund shares currently owned (Class A, B, C, K 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 public offering price 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 and/or INVESCO 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 and INVESCO funds;
- when using the reinstatement privileges; and
- when a merger, consolidation, or acquisition of assets of an AIM or INVESCO 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.
MCF--04/04
TOOLS USED TO COMBAT EXCESSIVE SHORT-TERM TRADING ACTIVITY
While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors. Excessive short-term trading activity in the funds' shares (i.e., a purchase of fund shares followed shortly thereafter by a redemption of such shares, or vice versa) may hurt the long-term performance of certain funds by requiring them to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time. A I M Advisors, Inc. and its affiliates (collectively, the "AIM Affiliates") currently use the following tools designed to discourage excessive short-term trading in the retail funds within The AIM Family of Funds(R) and the INVESCO family of funds (together, the "funds"):
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) selective use of fair value pricing.
Each of these tools is described in more detail below. Although these tools are designed to discourage excessive short-term trading, you should understand that none of these tools alone nor all of them taken together eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with shareholder interests.
TRADE ACTIVITY MONITORING
The AIM Affiliates monitor selected trades on a daily basis in an effort to detect excessive short-term trading activities. If, as a result of this monitoring, the AIM Affiliates believe that a shareholder has engaged in excessive short-term trading, they may, in their discretion, ask the shareholder to stop such activities or refuse to process purchases or exchanges in the shareholder's accounts other than exchanges into a money market fund. In making such judgments, the AIM Affiliates seek to act in a manner that they believe is consistent with the best interests of shareholders.
The ability of the AIM Affiliates to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts. This is one reason why this tool cannot eliminate the possibility of excessive short-term trading.
TRADING GUIDELINES
If you exceed four exchanges out of a fund (other than AIM Money Market Fund, AIM Tax-Exempt Cash Fund, AIM Limited Maturity Treasury Fund and INVESCO U.S. Government Money Fund) per calendar year, or a fund or the distributor determines, in its sole discretion, that your short-term trading activity is excessive (regardless of whether or not you exceed such guidelines), it may, in its discretion, reject any additional purchase and exchange orders. Each fund and the distributor reserves the discretion to accept exchanges in excess of these guidelines on a case-by-case basis if it believes that granting such exceptions would be consistent with the best interests of shareholders. An exchange is the movement out of (redemption) one fund and into (purchase) another fund.
The ability of the AIM Affiliates to monitor exchanges made by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts. This is one reason why this tool cannot eliminate the possibility of excessive short-term trading.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, Class A, Investor Class or Institutional Class (applicable only to INVESCO S&P 500 Index Fund) shares of certain funds within 30 days of purchase. The AIM Affiliates expect to charge the redemption fee on other classes of shares when the funds' transfer agent system has the capability of processing the fee across these other classes. See "Redeeming Shares -- Redemption Fee" for more information.
The ability of a fund to assess a redemption fee on the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and approved fee-based program accounts is severely limited in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder account and may be further limited by systems limitations applicable to these types of accounts. Additionally, the AIM Affiliates maintain certain retirement plan accounts on a record keeping system that is currently incapable of processing the redemption fee. The provider of this system is working to enhance the system to facilitate the processing of this fee. These are two reasons why this tool cannot eliminate the possibility of excessive short-term trading activity.
FAIR VALUE PRICING
The trading hours for most foreign securities end prior to the close of the New York Stock Exchange, the time the fund's net asset value is calculated. The occurrence of certain events after the close of foreign markets, but prior to the close of the U.S. market (such as a significant surge or decline in the U.S. market) often will result in an adjustment to the trading prices of foreign securities when foreign markets open on the following business day. If such events occur, the fund may value foreign securities at fair value, taking into account such events, when it calculates its net asset value. Fair value determinations are made in good faith in accordance with procedures adopted by the Board of Directors or Trustees of the fund. See "Pricing of Shares -- Determination of Net Asset Value" for more information.
Fair value pricing results in an estimated price and may reduce the
possibility that short-term traders could take advantage of potentially "stale"
prices of portfolio holdings. However, if cannot eliminate the possibility of
excessive short-term trading.
MCF--04/04
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 and Investor Class shares for AIM fund accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-------------------------------------------------------------------------------------------------------------------------
Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per AIM fund investment for $50
403 and salary deferrals from Employer-
457 plans, and SEP, SARSEP and SIMPLE IRA plans) Sponsored Retirement Plans)
Systematic Purchase Plan 50 50
IRA, Roth IRA or Coverdell ESA 250 50
All other accounts 1,000 50
-------------------------------------------------------------------------------------------------------------------------
|
The maximum amount for a single purchase order of AIM Opportunities I Fund is $250,000.
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. Additionally, Federal law requires that the AIM fund verify and record your identifying information.
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, AIM from your confirmation statement to the
Investment Services, Inc., P.O. Box transfer agent.
4739, Houston, 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: AIM
Investment Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By Telephone Open your account using one of the Select the AIM Bank
methods described above. Connection--Servicemark-- 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 at 1-800-246-5463. 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.
-------------------------------------------------------------------------------------------------------------------------
|
MCF--04/04
GRANDFATHERED INVESTORS
Investor Class shares of a fund may be purchased only by: (1) persons or
entities who had established an account, prior to April 1, 2002, in Investor
Class shares of any of the funds currently distributed by A I M Distributors,
Inc. (the "Grandfathered Funds") and have continuously maintained such account
in Investor Class shares since April 1, 2002; (2) any person or entity listed in
the account registration for any Grandfathered Funds, which account was
established prior to April 1, 2002 and continuously maintained since April 1,
2002, such as joint owners, trustees, custodians and designated beneficiaries;
(3) customers of certain financial institutions, wrap accounts or other
fee-based advisory programs, or insurance company separate accounts, which have
had relationships with A I M Distributors, Inc. and/or any of the Grandfathered
Funds prior to April 1, 2002 and continuously maintained such relationships
since April 1, 2002; (4) defined benefit, defined contribution and deferred
compensation plans; and (5) AIM and INVESCO fund trustees and directors,
employees of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their
immediate families.
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 $50. 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 or INVESCO fund account to one or more
other AIM or INVESCO fund accounts with the identical registration. The account
from which exchanges are to be made must have a minimum balance of $5,000 before
you can use this option. Exchanges will occur on (or about) the 10th or 25th day
of the month, whichever you specify, in the amount you specify. The minimum
amount you can exchange to another AIM or INVESCO fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM or INVESCO fund at net asset value. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM or
INVESCO fund. You may invest your dividends and distributions (1) into another
AIM or INVESCO 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 or INVESCO fund paying the dividend must be at least $5,000; and (b) in the AIM or INVESCO fund receiving the dividend must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into another AIM or INVESCO 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 and INVESCO fund holdings should be rebalanced, on a
percentage basis, between two and ten of your AIM and INVESCO 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 or INVESCO funds for shares of
the same class of one or more other AIM or INVESCO 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, Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans,
401(k) 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 FEE
You may be charged a 2% redemption fee (on total redemption proceeds) if you redeem, including redeeming by exchange, Class A, Investor Class or Institutional Class (applicable only to INVESCO S&P 500 Index Fund) shares of the following funds (either by selling or
MCF--04/04
exchanging to another AIM fund or INVESCO fund) within 30 days of their purchase:
AIM Asia Pacific Growth Fund AIM Global Value Fund AIM Developing Markets Fund AIM High Yield Fund AIM European Growth Fund AIM International Emerging Growth Fund AIM European Small Company AIM International Growth Fund Fund AIM Trimark Fund AIM Global Aggressive Growth INVESCO International Core Equity Fund Fund INVESCO S&P 500 Index Fund AIM Global Growth Fund AIM Global Equity Fund |
The redemption fee will be retained by the fund from which you are redeeming shares (including redemptions by exchange), and is intended to offset the trading costs, market impact and other costs associated with short-term money movements in and out of the fund. The redemption fee is imposed to the extent that the number of fund shares you redeem exceeds the number of fund shares that you have held for more than 30 days. In determining whether the minimum 30 day holding period has been met, only the period during which you have held shares of the fund from which you are redeeming is counted. For this purpose, shares held longest will be treated as being redeemed first and shares held shortest as being redeemed last.
The 2% redemption fee will not be charged on transactions involving the following:
(1) total or partial redemptions of shares by omnibus accounts maintained by brokers that do not have the systematic capability to process the redemption fee;
(2) total or partial redemptions of shares by approved fee-based programs that do not have the systematic capability to process the redemption fee;
(3) total or partial redemptions of shares held through retirement plans maintained pursuant to Sections 401, 403, 408, 408A and 457 of the Internal Revenue Code (the "Code") where the systematic capability to process the redemption fee does not exist;
(4) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan set up in the funds;
(5) total or partial redemptions requested within 30 days following the death or
post-purchase disability of (i) any registered shareholder on an account or
(ii) the settlor of a living trust which is the registered shareholder of an
account, of shares held in the account at the time of death or initial
determination of post-purchase disability;
(6) total or partial redemption of shares acquired through investment of dividends and other distributions; or
(7) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of shares regardless of the type of account in which such shares are held. This goal is not immediately achievable because of systems limitations and marketplace resistance. Currently, the redemption fee may be applied on Class A and Investor Class shares (and Institutional Shares for INVESCO S&P 500 Index Fund). AIM expects to charge the redemption fee on all other classes of shares when the funds' transfer agent system has the capability of processing the fee across these other classes. In addition, AIM intends to develop a plan to encourage brokers that maintain omnibus accounts, sponsors of fee-based program accounts and retirement plan administrators for accounts that are exempt from the redemption fee pursuant to the terms above to modify computer programs to impose the redemption fee or to develop alternate processes to monitor and restrict short-term trading activity in the funds. Lastly, the provider of AIM's retirement plan record keeping system is working to enhance the system to facilitate the processing of the redemption fee. Until such computer programs are modified or alternate processes are developed, the fund's ability to assess a redemption fee on these types of share classes and accounts is severely limited. These are reasons why the redemption fees cannot eliminate the possibility of excessive short-term trading activity.
The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of failing the 90% income test or losing its registered investment company qualification for tax purposes.
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 AIM 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 or AIM Short Term Bond within 18 months of initial
Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
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 or AIM Short Term Bond Fund may not be exchanged for Class A shares of a Category III Fund.
MCF--04/04
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 AIM 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 AIM 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 or AIM Short Term II Fund or AIM Short Term Bond within 18 months of initial
Bond Fund Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
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 or AIM Short Term Bond within 18 months of initial
Fund 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
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(1) Beginning on February 17, 2003, Class A shares of a Category I, II or III Fund or AIM Short Term Bond 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 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 AIM Short or II Fund or AIM Short Term within 18 months of initial
Term Bond Fund Bond Fund purchase of Category I or II
- Class A shares of Category III Fund or AIM Short Term Bond
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 or AIM Short Term within 18 months of initial
Bond Fund purchase of Category III Fund
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
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(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 or AIM Short Term Bond 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.
MCF--04/04
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 at 1-800-246-5463.
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.
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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 $100. 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.
MCF--04/04
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, Class A shares and Class A3 shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and Investor Class shares), reinvest all or part of your redemption proceeds in Class A shares of any Category I or II AIM fund or AIM Short Term Bond 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 AIM fund, reinvest all or part of your redemption proceeds in Class A shares of that same Category III AIM 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 AIM fund or AIM Short Term Bond 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 IN KIND
Although the AIM funds and the INVESCO funds generally intend to pay redemption proceeds solely in cash, the AIM funds and the INVESCO funds reserve the right to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
REDEMPTIONS BY THE AIM FUNDS
If your account (Class A, Class A3, Class B, Class C and Investor Class 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 ($250 for Investor Class shares) 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 ($250 for Investor Class shares) 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, or the AIM fund is not able to verify your identity as required by law, the AIM fund may, at its discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM fund for those of another AIM or INVESCO fund. Before requesting an exchange, review the prospectus of the AIM or INVESCO 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.
You may be charged a redemption fee on certain redemptions, including exchanges. See "Redeeming Shares -- Redemption Fee."
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 or INVESCO fund.
You may also exchange:
(1) Class A shares of an AIM or INVESCO 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) or INVESCO 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) or INVESCO fund;
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class A3 shares of an AIM fund;
(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
MCF--04/04
February 17, 2003, and AIM Tax-Exempt Cash Fund) or INVESCO fund;
(7) Investor Class shares of an AIM or INVESCO fund for Class A shares of any AIM fund (excluding AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) or INVESCO fund or Class A3 shares of an AIM fund; or
(8) Class A or A3 shares of an AIM or INVESCO fund for Investor Class shares of any AIM or INVESCO fund as long as you are eligible to purchase Investor Class shares of any AIM or INVESCO fund at the time of exchange.
You may be required to pay an initial sales charge when exchanging from a fund with a lower initial sales charge than the one into which you are exchanging. If you exchange 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 or INVESCO 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) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund; or
(b) Class A shares of another AIM or INVESCO 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 or INVESCO 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;
(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 AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund for Class A shares of a Category III AIM fund after February 16, 2003; or
(2) Class A shares of a Category III AIM fund for Class A shares of another Category III AIM 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 AIM 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 AIM funds purchased at net asset value for Class A shares of a Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund;
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM or INVESCO 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 a Category I or II AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund 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 Fund for Class A shares of Category III AIM 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 AIM fund, Class A shares of AIM Short Term Bond Fund or Class A shares of an INVESCO fund (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 or INVESCO 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 MCF--04/04
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C shares of any AIM or INVESCO fund or for Class A shares of any AIM or INVESCO fund that are subject to a CDSC, however, if you originally purchased Class A shares of a Category I or II AIM fund or AIM Short Term Bond 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 AIM fund or AIM Short Term Bond Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM or INVESCO fund into which you are exchanging;
- Shares of the AIM or INVESCO 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; and
- If you have physical share certificates, you must return them to the transfer agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM or INVESCO 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. The exchange privilege is not an option or right to purchase shares. Any of the participating AIM or INVESCO funds or the distributor may modify or terminate this privilege at any time. The AIM or INVESCO 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 or INVESCO 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 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. 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 AIM funds' shares are determined as of the close of the respective markets. Events affecting the values of such securities may occur between the times at which the particular foreign market closes and the close of the customary
MCF--04/04
trading session of the NYSE which would not ordinarily be reflected in the computation of the AIM fund's net asset value. If a development/event is so significant such that there is a reasonably high degree of certainty as to both the effect and the degree of the 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds. 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 and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend 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 or INVESCO 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--04/04
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 the 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: AIM Investment 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
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You can also 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.
AIM Trimark Fund
SEC 1940 Act file number: 811-05426
AIMinvestments.com T-TRI-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
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STATEMENT OF
ADDITIONAL INFORMATION
AIM INVESTMENT FUNDS
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, AS APPLICABLE, OF EACH PORTFOLIO (EACH A "FUND," COLLECTIVELY THE "FUNDS") OF AIM INVESTMENT FUNDS 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, AS APPLICABLE, 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:
AIM INVESTMENT SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MARCH 1, 2004, AS REVISED NOVEMBER 1, 2004, RELATES TO THE CLASS A, CLASS B, CLASS C AND CLASS R SHARES, AS APPLICABLE, OF THE FOLLOWING PROSPECTUSES:
FUND DATED
---- -----
AIM DEVELOPING MARKETS FUND MARCH 1, 2004
AIM GLOBAL HEALTH CARE FUND MARCH 1, 2004
AIM LIBRA FUND MARCH 1, 2004
AIM TRIMARK ENDEAVOR FUND MARCH 1, 2004, AS REVISED APRIL 30, 2004
AIM TRIMARK FUND MARCH 1, 2004, AS REVISED NOVEMBER 1, 2004
AIM TRIMARK SMALL COMPANIES FUND MARCH 1, 2004, AS REVISED APRIL 30, 2004
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AIM INVESTMENT FUNDS
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............................................................................ 7
Foreign Investments........................................................................... 7
Debt Investments.............................................................................. 9
Other Investments............................................................................. 10
Investment Techniques......................................................................... 12
Derivatives................................................................................... 16
Additional Securities or Investment Techniques................................................ 22
Fund Policies.......................................................................................... 24
Concentration of Investments........................................................................... 26
Temporary Defensive Positions.......................................................................... 27
Portfolio Turnover..................................................................................... 27
MANAGEMENT OF THE TRUST......................................................................................... 27
Board of Trustees...................................................................................... 27
Management Information................................................................................. 27
Trustee Ownership of Fund Shares.............................................................. 28
Factors Considered in Approving the Investment Advisory Agreement and Sub-Advisory Agreement.. 29
Compensation........................................................................................... 29
Retirement Plan For Trustees.................................................................. 30
Deferred Compensation Agreements.............................................................. 30
Purchase of Class A Shares of the Funds at Net Asset Value.................................... 30
Codes of Ethics........................................................................................ 31
Proxy Voting Policies.................................................................................. 31
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................................................. 31
INVESTMENT ADVISORY AND OTHER SERVICES.......................................................................... 31
Investment Advisor..................................................................................... 31
Investment Sub-Advisor................................................................................. 33
Service Agreements..................................................................................... 34
Other Service Providers................................................................................ 34
BROKERAGE ALLOCATION AND OTHER PRACTICES........................................................................ 35
Brokerage Transactions................................................................................. 35
Commissions............................................................................................ 35
Brokerage Selection.................................................................................... 36
Directed Brokerage (Research Services)................................................................. 37
Regular Brokers or Dealers............................................................................. 37
Allocation of Portfolio Transactions................................................................... 37
Allocation of Initial Public Offering ("IPO") Transactions............................................. 37
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PURCHASE, REDEMPTION AND PRICING OF SHARES...................................................................... 38
Purchase and Redemption of Shares...................................................................... 38
Offering Price......................................................................................... 55
Redemption In Kind..................................................................................... 56
Backup Withholding..................................................................................... 57
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................................................ 57
Dividends and Distributions............................................................................ 57
Tax Matters............................................................................................ 58
DISTRIBUTION OF SECURITIES...................................................................................... 65
Distribution Plans..................................................................................... 65
Distributor............................................................................................ 67
CALCULATION OF PERFORMANCE DATA................................................................................. 68
REGULATORY INQUIRIES AND PENDING LITIGATION..................................................................... 73
APPENDICES:
RATINGS OF DEBT SECURITIES...................................................................................... A-1
TRUSTEES AND OFFICERS........................................................................................... B-1
TRUSTEE COMPENSATION TABLE...................................................................................... C-1
PROXY VOTING POLICIES........................................................................................... D-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................................................. E-1
MANAGEMENT FEES................................................................................................. F-1
ADMINISTRATIVE SERVICES FEES.................................................................................... G-1
BROKERAGE COMMISSIONS........................................................................................... H-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS................ I-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS......................................... J-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS................................................... K-1
TOTAL SALES CHARGES............................................................................................. L-1
PERFORMANCE DATA................................................................................................ M-1
REGULATORY INQUIRIES AND PENDING LITIGATION..................................................................... N-1
FINANCIAL STATEMENTS............................................................................................ FS
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GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Investment Funds (the "Trust") is 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. The Trust currently consists of six separate portfolios: AIM Developing Markets Fund, AIM Global Health Care Fund, AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies 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 of the Trust (the "Board") 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 October 29, 1987 as a Maryland corporation. The Trust reorganized as a Delaware business trust on May 7, 1998. All historical financial and other information contained in this Statement of Additional Information for periods prior to September 8, 1998 relating to these Funds (or a class thereof), except for AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, is that of AIM Investment Funds, Inc. the Maryland corporation (or the corresponding class thereof). Each of AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund commenced operations as a series of the Trust.
Effective shortly after AIM Trimark Small Companies Fund reaches $500
million in assets, the Fund will limit public sales of its shares to certain
investors. The following types of investors may continue to invest in the Fund
if they are invested in the fund as of the date on which the Fund limited public
sales of its shares to certain investors and remain invested in the Fund after
that date: 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").
Please contact AIM Distributors for approval. The following types of investors
may open new accounts in either 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 Trimark Small Companies 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 or redemption fee) 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, 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 separate classes of shares as follows:
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS R CLASS
---- ------- ------- ------- ------- -------------
AIM Developing Markets Fund X X X
AIM Global Health Care Fund X X X
AIM Libra Fund X X X
AIM Trimark Endeavor Fund X X X X X
AIM Trimark Fund X X X X X
AIM Trimark Small Companies Fund X X X X X
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This Statement of Additional Information relates solely to the Class A, Class B, Class C and Class R shares, if applicable, of the Funds. The Institutional Class shares of the Funds are intended for use by certain eligible institutional investors, are discussed in a separate Statement of Additional Information and are available to the following:
- 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 an interest 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 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, conversion 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 other than AIM Developing Markets Fund 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 Registered Trademark. 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 INVESTMENT FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
SECURITY/ AIM AIM GLOBAL AIM TRIMARK
INVESTMENT DEVELOPING HEALTH CARE AIM LIBRA AIM TRIMARK AIM TRIMARK SMALL COMPANIES
TECHNIQUE MARKETS FUND FUND FUND ENDEAVOR FUND FUND FUND
--------- ------------ ----------- --------- ------------- ----------- ---------------
EQUITY INVESTMENTS
Common Stock X X X X X X
Preferred Stock X X X X X X
Convertible Securities X X X X X X
Alternative Entity X X X X X X
Securities
FOREIGN INVESTMENTS
Foreign Securities X X X X X X
Foreign Government X X X X X X
Obligations
Foreign Exchange X X X X X X
Transactions
DEBT INVESTMENTS
U.S. Government X X X X X X
Obligations
Rule 2a-7 Requirements
Mortgage-Backed and
Asset-Backed Securities
Collateralized Mortgage
Obligations
Bank Instruments
Commercial Instruments
Participation Interests
Municipal Securities
Municipal Lease
Obligations
Investment Grade X X X X X X
Corporate Debt Obligations
Junk Bonds X X X X X
Liquid Assets X X X X X X
OTHER INVESTMENTS
REITs X X X X X X
Other Investment Companies X X X X X X
Defaulted Securities
Municipal Forward
Contracts
Variable or Floating Rate X
Instruments
Indexed Securities X
Zero-Coupon and X
Pay-in-Kind Securities
Synthetic Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed Delivery X X X X X X
Transactions
When-Issued Securities X X X X X X
Short Sales X X X X X X
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FUND
SECURITY/ AIM AIM GLOBAL AIM TRIMARK
INVESTMENT DEVELOPING HEALTH CARE AIM LIBRA AIM TRIMARK AIM TRIMARK SMALL COMPANIES
TECHNIQUE MARKETS FUND FUND FUND ENDEAVOR FUND FUND FUND
--------- ------------ ----------- --------- ------------- ----------- ---------------
Margin Transactions
Swap Agreements X X X X X X
Interfund Loans X X X X X X
Borrowing X X X X X X
Lending Portfolio
Securities X X X X X X
Repurchase Agreements X X X X X X
Reverse Repurchase
Agreements X X
Dollar Rolls X
Illiquid Securities X X X X X X
Rule 144A Securities X X X X X X
Unseasoned Issuers X X
Portfolio Transactions
Sale of Money Market
Securities
Standby Commitments
DERIVATIVES
Equity-Linked Derivatives X X X X X X
Put Options X X X X X X
Call Options X X X X X X
Straddles X X X X X X
Warrants X X X X X X
Futures Contracts and
Options on Futures
Contracts X X X X X X
Forward Currency Contracts X X X X X X
Cover X X X X X X
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Loan Participations and
Assignments X
Privatizations X X X X X
Indexed Commercial Paper X
Samurai and Yankee Bonds X
Premium Securities X
Structured Investments X
Stripped Income Securities X
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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.
The Funds will invest in a convertible debt security based primarily on the characteristics of the equity security into which it converts, and without regard to the credit rating of the convertible security (even if the credit rating is below investment grade). To the extent that a Fund invests in convertible debt securities with credit ratings below investment grade, such securities may have a higher likelihood of default, although this may be somewhat offset by the convertibility feature. See also "Debt Investments - Junk Bonds" below.
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 100% of its total assets in foreign securities, except that AIM Libra Fund, AIM Trimark Endeavor Fund and AIM Trimark Small Companies Fund may each 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.
Risks of Developing Countries. AIM Developing Markets Fund may invest all of its total assets in securities of companies located in developing countries. AIM Global Health Care Fund may invest up to 20%, AIM Trimark Endeavor Fund and AIM Trimark Fund may each invest up to 15% and AIM Libra Fund and AIM Trimark Small Companies Fund may each invest up to 5%, of their respective total assets in securities of companies located in developing countries. Developing countries are those countries which are not included in the MSCI World Index. The Funds consider various factors when determining whether a company is in a developing country, including whether (1) it is organized under the laws of a developing country; (2) it has a principal office in a developing country; (3) it derives 50% or more of its total revenues from business in a developing country; or (4) its securities are traded principally on a stock exchange, or in an over-the-counter market, in a developing country. 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 risk 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 interests 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 government of developing countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds."
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
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.
JUNK BONDS. Each of the funds other than AIM Libra Fund may invest in junk bonds. Junk bonds are lower-rated or non-rated debt securities. Junk bonds are considered speculative with respect to their capacity to pay interest and repay principal in accordance with the terms of the obligation. While generally providing greater income and opportunity for gain, non-investment grade debt securities are subject to greater risks than higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly leveraged issuers of high yield securities may experience financial stress, and may not have sufficient revenues to meet their interest payment obligations. Economic downturns tend to disrupt the market for junk bonds, lowering their values, and increasing their price volatility. The risk of issuer default is higher with respect to junk bonds because such issues are generally unsecured and are often subordinated to other creditors of the issuer.
The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. The lower the rating of a junk bond, the more speculative its characteristics.
The Funds may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid secondary market may have an adverse effect on the market price and a Fund's ability to dispose of particular issues and may also make it more difficult for the Fund to obtain accurate market quotations in valuing these assets. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds at an unfavorable price. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments than those of higher-rated debt securities. AIM Global Health Care Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may each invest up to 5% of total assets, and AIM Developing Markets Fund may invest up to 50% of total assets in junk bonds.
Descriptions of debt securities ratings are found in Appendix A.
LIQUID ASSETS. 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 and municipal obligations).
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.
VARIABLE OR FLOATING RATE INSTRUMENTS. AIM Developing Markets Fund may invest in securities which have variable or floating interest rates which are readjusted on set dates (such as the last day of the month or calendar quarter) in the case of variable rates or whenever a specified interest rate change occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate securities than for fixed rate obligations. Many securities with variable or floating interest rates purchased by a Fund are subject to payment of principal and accrued interest (usually within seven days) on the Fund's demand. The terms of such demand instruments require payment of principal and accrued interest by the issuer, a guarantor, and/or a liquidity provider. All variable or floating rate instruments will meet the applicable quality standards of a Fund. AIM will monitor the pricing, quality and liquidity of the variable or floating rate securities held by the Funds.
INDEXED SECURITIES. AIM Developing Markets Fund may invest in indexed securities the value of which is linked to interest rates, commodities, indices or other financial indicators. Most indexed securities are short to intermediate term fixed income securities whose values at maturity (principal value) or interest rates rise or fall according to changes in the value of one or more specified underlying instruments. Indexed securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying instrument appreciates), and may have return characteristics similar to direct investments in the underlying instrument or to one or more options on the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself and could involve the loss of all or a portion of the principal amount of the indexed security.
ZERO-COUPON AND PAY-IN-KIND SECURITIES. AIM Developing Markets Fund may, but does not currently intend to, invest in zero-coupon or pay-in-kind securities. These securities are debt securities that do not make regular cash interest payments. Zero-coupon securities are sold at a deep discount to
their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because zero-coupon and pay-in-kind securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. While these securities do not pay current cash income, federal tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accrued during that year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain excise taxes, the Fund may be required to distribute a portion of such discount and income, and may be required to dispose of other portfolio securities, which could occur during periods of adverse market prices, in order to generate sufficient cash to meet these distribution requirements.
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 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 funds advised by AIM (the "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 borrowings 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 a 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 the 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 under the 1933 Act, 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.
AIM Global Health Care Fund cannot invest more than 5% of total assets in joint ventures, cooperatives, partnerships and state enterprises which are illiquid.
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, 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.
UNSEASONED ISSUERS. AIM Libra Fund and AIM Trimark Small Companies Fund may invest in equity securities of unseasoned issuers. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies.
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 the 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 a 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. A 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 a 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
PARTICIPATION INTERESTS. AIM Developing Markets Fund may purchase participations in corporate loans. Participation interests generally will be acquired from a commercial bank or other financial institution (a "Lender") or from other holders of a participation interest (a "Participant"). The purchase of a participation interest either from a Lender or a Participant will not result in any direct contractual relationship with the borrowing company (the "Borrower"). The Fund generally will have no right directly to enforce compliance by the Borrower with the terms of the credit agreement. Instead, the Fund will be required to rely on the Lender or the Participant that sold the participation interest both for the enforcement of the Fund's rights against the Borrower and for the receipt and processing of payments due to the Fund under the loans. Under the terms of a participation interest, the Fund may be regarded as a creditor of the Participant and thus the Fund is subject to the credit risk of both the Borrower and a Lender or a Participant. Participation interests are generally subject to restrictions on resale. The Fund
considers participation interests to be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities.
PRIVATIZATIONS. Each of the funds other than AIM Libra Fund may invest in privatizations. The governments of some foreign countries have been engaged in selling part or all of their stakes in government-owned or controlled enterprises ("privatizations"). AIM believes that privatizations may offer opportunities for significant capital appreciation and intends to invest assets of the Funds in privatizations in appropriate circumstances. In certain foreign countries, the ability of foreign entities such as the Funds to participate may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can be no assurance that foreign governments will continue to sell companies currently owned or controlled by them or that privatization programs will be successful.
INDEXED COMMERCIAL PAPER. AIM Developing Markets Fund may invest without limitation in commercial paper which is indexed to certain specific foreign currency exchange rates. The terms of such commercial paper provide that its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the exchange rate between two currencies while the obligation is outstanding. The Fund will purchase such commercial paper with the currency in which it is denominated and, at maturity, will receive interest and principal payments thereon in that currency, but the amount of principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate between the two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rates enables the funds to hedge against a decline in the U.S. dollar value of investments denominated in foreign currencies while seeking to provide an attractive money market rate of return. The Fund will not purchase such commercial paper for speculation.
SAMURAI AND YANKEE BONDS. Subject to its fundamental investment restrictions, AIM Developing Markets Fund may invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai bonds"), and may invest in dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in their countries of domicile, such bond issues normally carry a higher interest rate but are less actively traded. It is the policy of the Fund to invest in Samurai or Yankee bond issues only after taking into account considerations of quality and liquidity, as well as yield.
PREMIUM SECURITIES. AIM Developing Markets Fund may invest in income securities bearing coupon rates higher than prevailing market rates. Such "premium" securities are typically purchased at prices greater than the principal amounts payable on maturity. The Fund will not amortize the premium paid for such securities in calculating its net investment income. As a result, in such cases the purchase of such securities provides the Fund a higher level of investment income distributable to shareholders on a current basis than if the Fund purchased securities bearing current market rates of interest. If securities purchased by the Fund at a premium are called or sold prior to maturity, the Fund will realize a loss to the extent the call or sale price is less than the purchase price. Additionally, the Fund will realize a loss if it holds such securities to maturity.
STRUCTURED INVESTMENTS. AIM Developing Markets Fund may invest a portion of its assets in interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of Sovereign Debt. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Investments") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued Structured Investments to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to Structured Investments is dependent on the extent of the cash flow on the underlying instruments. Because Structured Investments of the type in
which the Fund anticipates it will invest typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments.
AIM Developing Markets Fund is permitted to invest in a class of Structured Investments that is either subordinated or not subordinated to the right of payment of another class. Subordinated Structured Investments typically have higher yields and present greater risks than unsubordinated Structured Investments.
Certain issuers of Structured Investments may be deemed to be "investment companies" as defined in the 1940 Act. As a result, AIM Developing Markets Fund's investment in these Structured Investments may be limited by the restrictions contained in the 1940 Act described below under "Investment Strategies and Risks - Other Investment Companies." Structured Investments are typically sold in private placement transactions, and there currently is no active trading market for Structured Investments.
STRIPPED INCOME SECURITIES. AIM Developing Markets Fund may invest a portion of its assets in stripped income securities, which are obligations representing an interest in all or a portion of the income or principal components of an underlying or related security, a pool of securities or other assets. In the most extreme case, one class will receive all of the interest (the "interest only class" or the "IO class"), while the other class will receive all of the principal (the "principal-only class" or the "PO class"). The market values of stripped income securities tend to be more volatile in response to changes in interest rates than are conventional income securities.
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, except that AIM Developing Markets Fund is not subject to
restriction (1) and AIM Global Health Care Fund is not subject to restriction
(4). 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.
(9) AIM Global Health Care Fund will concentrate (as such term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) its investments in the securities of domestic and foreign issuers in the health care industry.
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 and the sub-advisor of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to each of the Funds, except that AIM Developing Markets Fund is not subject to restriction (1) and AIM Global Health Care is not subject to restriction (3). 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 AIM Funds, subject to the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33-1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM Fund. The Fund may not borrow for leveraging, but may borrow for temporary
or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets or when any borrowings from an AIM 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 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.
(7) The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:
(1) AIM Developing Markets Fund normally invests at least 80% of its assets in securities of companies that are in developing markets countries. 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 Global Health Care Fund normally invests at least 80% of its assets in securities of health care industry 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.
(3) AIM Trimark Small Companies Fund normally invests at least 80% of its assets in marketable equity 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.
CONCENTRATION OF INVESTMENTS
For purposes of AIM Global Health Care Fund's fundamental investment restriction regarding industry concentration, a company will be considered a health care company if (1) at least 50% of its gross income or its net sales are derived from activities in the health care industry; (2) at least 50% of its assets are devoted to producing revenues from the health care industry; or (3) based on other available information, AIM determines that its primary business is within the health care industry.
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
AIM Global Health Care Fund's portfolio turnover rate dropped from 153% in 2002 to 99% in 2003. This drop can be attributed to an increased investment in securities of pharmaceutical companies. Many of the Fund's holdings in pharmaceutical companies were purchased for value and have been held in anticipation of appreciation.
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. The Board 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. 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 are the Audit Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Committee Relating to Market Timing Issues.
The members of the Audit Committee are Bob R. Baker, James T. Bunch, Edward K. Dunn, Jr. (Chair), Lewis F. Pennock, Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H. Quigley, (Vice Chair). The Audit Committee is responsible for: (i) the appointment, compensation and oversight of any independent auditors employed by each Fund (including monitoring the independence, qualifications and performance of such auditors and resolution of disagreements between Funds' management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services; (ii) overseeing the financial reporting process of each Fund; (iii) monitoring the process and the resulting financial statements prepared by management to promote accuracy and integrity of the financial statements and asset valuation; (iv) assisting the Board's oversight of each Fund's compliance with legal and regulatory requirements that relate to the Fund's accounting and financial reporting, internal control over financial reporting and independent audits; (v) to the extent required by Section 10A of the Securities Exchange Act of 1934, pre-approving all permissible non-audit services that are provided to each Fund by its independent auditors; (vi) pre-approving, in accordance with Item 2.01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by each Fund's independent auditors to the Fund's investment advisor and certain other affiliated entities; and (vii) to the extent required by Regulation 14A, preparing an audit committee report for inclusion in the Fund's annual proxy statement. During the fiscal year ended October 31, 2003, the Audit Committee held seven meetings.
The members of the Governance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden, Jack M. Fields (Vice Chair), Gerald J. Lewis
and Louis S. Sklar. The Governance Committee is responsible for: (i) nominating
persons who are not interested persons of the Trust 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 Trust at
meetings called for the election of trustees; (ii) nominating persons for
appointment as members of each committee of the Board, including, without
limitation, the Audit Committee, the Governance Committee, the Investments
Committee and the Valuation Committee, and to nominate persons for appointment
as chair and vice chair of each such committee; (iii) reviewing from time to
time the compensation payable to the 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 Trust.
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
October 31, 2003, the Governance Committee held five meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of a Fund desiring to nominate a trustee for election at a shareholder meeting must submit to the Trust's Secretary the nomination in writing not later than the close of business on the later of the 90th day prior to such shareholder meeting or the tenth day following the day on which public announcement is made of the shareholder meeting and not earlier than the close of business on the 120th day prior to the shareholder meeting.
The members of the Investments Committee are Messrs. Baker (Vice Chair), Bayley (Vice Chair), Bunch, Crockett, Dowden (Chair), Dunn, Fields, Lewis, Pennock, Sklar and Soll, and Carl Frischling, and 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 October 31, 2003, the Investments Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn, Pennock and Soll (Chair), and Miss Quigley (Vice Chair). The Valuation Committee meets on an ad hoc basis when the Board is not available to review matters related to valuation. During the fiscal year ended October 31, 2003, the Valuation Committee held one meeting.
The members of the Special Committee Relating to Market Timing Issues are Messrs. Crockett, Dowden, Dunn, and Lewis (Chair). The purpose of the Special Committee Relating to Market Timing Issues is to remain informed on matters relating to alleged excessive short term trading in shares of the Funds ("market timing") and to provide guidance to special counsel for the independent trustees on market timing issues and related matters between meetings of the independent trustees. During the fiscal year ended October 31, 2003, the Special Committee Relating to Market Timing Issues did not meet.
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 and Sub-Advisory Agreement
The advisory agreement with AIM (the "Advisory Agreement") was
re-approved for each Fund by the Board at a meeting held on June 8-9, 2004. The
sub-advisory agreement between AIM and AIM Funds Management Inc. - Canada ("the
"Sub-Advisor") (collectively with AIM, the "Advisors") for AIM Trimark Endeavor
Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund (the "Sub-Advisory
Agreement") (collectively with the Advisory Agreement, the "Advisory
Agreements"), was re-approved by the Board at a meeting held on June 8-9, 2004.
In evaluating the fairness and reasonableness of the Advisory Agreements, the
Board considered a variety of factors for each Fund, as applicable, including:
the requirements of each Fund for investment supervisory and administrative
services; the quality of the Advisors' services, including a review of each
Fund's investment performance, if applicable, and the Advisors' investment
personnel; the size of the fees in relationship to the extent and quality of the
investment advisory services rendered; fees charged to the Advisors' 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 in relationship to
contractual limitations; any fee waivers (or payments of Fund expenses) by the
Advisors; the Advisors' profitability; the benefits received by the Advisors
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 the Advisors and conditions and trends
prevailing in the economy, the securities markets and the mutual fund industry;
and the historical relationship between each Fund and the Advisors.
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 their 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 with respect to each Fund: (i) the services provided to the Fund and its shareholders were adequate; (ii) Advisory Agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the Advisory Agreements would have been obtained through arm's length negotiations. The Board therefore concluded that each Fund's Advisory Agreements, as applicable, were in the best interests of each Fund and its shareholders and approved the Advisory Agreements.
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, 2003 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 Board, 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.
Purchase 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 AIM 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 AIM 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, AIM Distributors and AIM Funds Management Inc. (the sub-advisor to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund) 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.
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy voting for securities held by each Fund other than AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund to the Fund's investment advisor, and with respect to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, to AIM Funds Management, Inc., the Sub-Advisor. The investment advisor and Sub-Advisor will vote such proxies in accordance with their proxy policies and procedures, which have been reviewed and approved by the Board, and which are found in Appendix D.
Any material changes to the proxy policies and procedures will be submitted to the Board for approval. The Board will be supplied with a summary quarterly report of each Fund's proxy voting record.
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 E. 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 200 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. The Advisory Agreement provides that, in fulfilling its responsibilities, AIM may engage the services of other investment managers with respect to one or more of the Funds. The investment advisory services of AIM and the investment sub-advisory services of the Sub-Advisor to the Funds are not exclusive and AIM and the Sub-Advisor(s) are free to render investment advisory services to others, including other investment companies.
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 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, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption, and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to trustees and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders.
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 the 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 Developing Markets Fund First $500 million 0.975%
AIM Global Health Care Fund Next $500 million 0.95%
Next $500 million 0.925%
On amounts thereafter 0.90%
AIM Libra Fund First $1 billion 0.85%
AIM Trimark Fund On amounts thereafter 0.80%
AIM Trimark Small Companies Fund
AIM Trimark Endeavor Fund First $1 billion 0.80%
On amounts thereafter 0.75%
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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 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. Termination of this agreement requires approval by the Board . See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies."
AIM has contractually agreed through October 31, 2004, to limit total annual fund operating expenses (excluding interest, taxes, dividend expense on short sales, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees, and increases in expenses due to expense offset arrangements, if any) on AIM Developing Markets Fund's
Class A, Class B and Class C shares to the extent necessary to limit the total operating expenses on Class A shares to 2.00% (e.g., if AIM waives 0.10% of Class A expenses, AIM will also waive 0.10% of Class B and Class C expenses). Such contractual fee waivers or reductions are set forth in the Fee Table to each Fund's Prospectus and may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
INVESTMENT SUB-ADVISOR
AIM has entered into a Sub-Advisory Agreement with the Sub-Advisor to provide investment sub-advisory services to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund.
The Sub-Advisor is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
The Sub-Advisor is located at 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7 and has provided investment management and/or administrative services to pension funds, insurance funds, unit trusts, offshore funds and a variety of institutional accounts since 1981.
AIM and the Sub-Advisor are indirect wholly owned subsidiaries of
AMVESCAP PLC (formerly, AMVESCO PLC and INVESCO PLC).
For the services to be rendered by the Sub-Advisor under the Sub-Advisory Agreement, AIM will pay to the Sub-Advisor a fee which will be computed daily and paid as of the last day of each month on the basis of each Fund's daily net asset value, using for each daily calculation the most recently determined net asset value of each Fund. (See "Computation of Net Asset Value.") On an annual basis, the sub-advisory fee is equal to 40% of AIM's compensation in respect of the sub-advised assets per year, for each of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund.
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 October 31 are found in Appendix F.
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 Board, 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. 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 October 31 are found in Appendix G.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS") (formerly, A I M Fund Services, Inc.), 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 AIS provides that AIS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AIS 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. AIS 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 AIS 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 purchases of shares of the Funds. 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 has selected PricewaterhouseCoopers LLP, 1201 Louisiana Street, 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
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor 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 October 31 are found in Appendix H.
COMMISSIONS
During the last three fiscal years ended October 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 certain other Funds or accounts (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards 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 providing electronic communications of trade information, and providing custody services, as well as providing equipment used to communicate research information, and providing specialized consultations with AIM personnel with respect to computerized systems and data furnished to AIM as a component of other research services, arranging meetings with management of companies, and providing access to consultants who supply research information.
The outside research assistance is useful to AIM since the broker-dealers used by AIM tend to provide a more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. 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 brokerage 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 and (2) the research services provided by the broker. Portfolio transactions also may be effected through broker-dealers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients. AIM will not enter into a binding commitment with brokers to place trades with such brokers involving brokerage commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended October 31, 2003 are found in Appendix I.
REGULAR BROKERS OR DEALERS
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended October 31, 2003 is found in Appendix I.
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. 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 and any other AIM Fund which has more than 5% of its outstanding shares owned by AIM or one of its affiliates, officers, directors or employees, 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.
On occasion, when the Sub-Advisor is purchasing certain thinly-traded securities or shares in an IPO for AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, the situation may arise that the Sub-Advisor is unable to obtain sufficient securities to fill the orders of the Fund or all other relevant clients. In that situation, the Sub-Advisor is required to use pro-rata allocation methods that ensure the fair and equitable treatment of all clients.
The requirement of pro-rata allocation is subject to limited exceptions
- such as when the Fund is subject to special investment objectives or size
constraints on investment positions.
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, AIM Money Market Fund and AIM Short Term Bond 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 Allocation Fund
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 Conservative Allocation Fund
AIM Constellation Fund
AIM Dent Demographic Trends Fund
AIM Diversified Dividend Fund
AIM Emerging Growth Fund
AIM European Growth Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM International Growth Fund
AIM Large Cap Basic Value 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 Moderate Allocation Fund
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Small Cap Growth Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies 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 Growth Fund
AIM Global Health Care Fund
AIM Global Equity Fund
AIM High Income Municipal Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate 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
|
AIM SHORT TERM 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 $ 100,000 2.50 2.56 2.00
$100,000 but less than $ 250,000 2.00 2.04 1.50
$250,000 but less than $ 500,000 1.50 1.52 1.25
$500,000 but less than $1,000,000 1.25 1.27 1.00
|
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 Funds and Class A shares of AIM Short Term Bond 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 Class A shares of AIM Short Term Bond Fund 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. If an investor makes a Large Purchase of Class A shares of a Category I or II Fund and Class A shares of AIM Short Term Bond 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.
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 or AIM Short Term Bond Fund 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 or AIM Short Term Bond Fund on or 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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 any additional dealer concession upon the exchange. Beginning on 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 and AIM Short Term Bond Fund, 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 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 life 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 Section 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 and AIM Short Term Bond Fund are subject to an 18-month, 1.00% 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 contracts purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund or AIM Short Term Bond 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 and Investor Class shares of any 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, Registered Trademark and any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons;
- Any current or retired officer, director, or employee (and members of their immediate family), of 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;
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;
- Shareholders of Investor Class shares of an AIM Fund;
- Qualified Tuition Programs created and maintained in accordance with
Section 529 of the Code;
- Initial purchases made by Qualified Purchasers, as defined above, within one (1) year after the registered representative who services their account(s) has become affiliated with a selling group member with which AIM Distributors has entered into a written agreement; 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 out of its own financial resources or as an expense for which it may be compensated or reimbursed by an AIM Fund under a distribution plan, if applicable, make cash payments to dealer firms as an incentive to sell shares of the funds and/or to promote retention of their customers' assets in the funds. Such cash payments may be calculated on sales of shares of AIM Funds ("Sales-Based Payments"), in which case the total amount of such payments shall not exceed 0.25% of the public offering price of all shares sold by the dealer firm during the applicable period. Such cash
payments also may be calculated on the average daily net assets of the applicable AIM Fund(s) attributable to that particular dealer ("Asset-Based Payments'), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. AIM Distributors may agree to make such cash payments to a dealer firm in the form of either or both Sales-Based Payments and Asset-Based Payments. AIM Distributors may also make other cash payments to dealer firms in addition to or in lieu of Sales-Based Payments and Asset-Based Payments, in the form of payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives of those dealer firms and their families to places within or outside the United States; meeting fees; entertainment; transaction processing and transmission charges; advertising or other promotional expenses; or other amounts as determined in AIM Distributor's discretion. In certain cases these other payments could be significant to the dealer firms. To the extent dealer firms sell more shares of the Funds or cause clients to retain their investment in the Funds, AIM benefits from management and other fees it is paid with respect to those assets. Any payments described above 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. AIM Distributors determines the cash payments described above in its discretion in response to requests from dealer firms, based on factors it deems relevant. 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).
Purchases of Investor Class Shares
Investor Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSD. AIM Distributors may pay dealers and institutions an annual fee of 0.25% of average daily net assets and such payments will commence immediately.
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 AIS at (800) 959-4246. If a shareholder is unable to reach AIS 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 AIS as long as such request is received prior to the close of the customary trading session of the New York Stock Exchange ("NYSE"). AIS 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 AIS, 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 AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS in the designated account(s), present or future, with full power of substitution in the premises. AIS 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 AIS 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. AIS 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 $100 per withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AIS and all dividends and distributions are reinvested in shares of the applicable AIM Fund by AIS. To provide funds for payments made under the Systematic Redemption Plan, AIS 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 Class A 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 and AIM Short Term Bond Fund 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 K or Class R shares.
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 or AIM Short Term Bond 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 or AIM Short Term Bond Fund 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 or AIM Short Term Bond Fund acquired by exchange from Class A shares of a Category I or II Fund or AIM Short Term Bond 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 or AIM Short Term Bond 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 or AIM Short Term Bond 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 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 or AIM Short Term Bond Fund 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 or AIM Short Term Bond Fund, unless the Category I or II Fund or AIM Short Term Bond Fund shares acquired by exchange are redeemed within 18 months of the original purchase of the exchanged Category I or II Funds or AIM Short Term Bond Fund shares;
- Redemptions of Category I or II Funds or AIM Short Term Bond Fund 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; and
- Redemptions of shares of Category I or II Funds or AIM Short Term Bond Fund held by an Investor Class shareholder.
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 INVESCO International Core Equity Fund (formerly INVESCO International Blue Chip Value Fund) and AIM Real Estate Fund by shareholders of record on April 30, 1995, of AIM International Value Fund, predecessor to AIM International Core Equity Fund, and AIM Real Estate Fund, except that shareholders whose broker-dealers maintain a single omnibus account with AIS 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 70-1/2 or
older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular
AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of
the type described above invested in Class B or Class C shares
of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined
in the 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 Fund when the account value falls below the minimum required account size of $500; and
- Investment account(s) of AIM and its affiliates.
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 AIS 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 AIS in its sole discretion.
AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept purchase and redemption orders that are in good form on behalf of the AIM Funds. In certain cases, these authorized agents are authorized to designate other intermediaries to accept purchase and redemption orders on the Fund's behalf. The Fund will be deemed to have received the purchase or redemption order when the Fund's authorized agent or its designee accepts the order. The order will be priced at the net asset value next determined after the order is accepted by the Fund's authorized agent or its designee.
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 AIS. 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 AIS' current Signature Guarantee Standards and Procedures, such as certain domestic banks, credit unions, securities dealers, or securities exchanges. AIS 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 AIS.
TRANSACTIONS BY TELEPHONE. By signing an account application form, an investor appoints AIS as his true and lawful attorney-in-fact to surrender for redemption any and all unissued shares held by AIS 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. AIS 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 AIS 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. AIS 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 AIS 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 he 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 AIS. Upon receiving returned mail, AIS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AIS 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. AIS 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 October 31, 2003, AIM Global Health Care Fund - Class A shares had a net asset value per share of $24.09. The offering price, assuming an initial sales charge of 4.75%, therefore was $25.29.
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. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. 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. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statements due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
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; generally 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. 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. 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 each 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 such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds.
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
Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). A Fund may make a redemption in kind, for instance, if a cash redemption would disrupt its operations or performance. Securities delivered as payment in redemptions in kind will be 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 transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. 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.
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 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
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 AIS 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. 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 tax.
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 principles 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 qualification 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 an amount equal to (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 gains to redemptions of shares. In the event that the
Internal Revenue Service determines that a Fund is using an improper method of allocation and has under-distributed 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 (to the extent discussed below) in the case of corporate shareholders and will be included in the qualified dividend income of non-corporate shareholders. See "Fund Distributions" below.
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. In certain cases a fund may make an election to treat such gain or loss as capital.
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 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 or be less than its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income, qualified dividend 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, 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 and character 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 a 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 and as qualified dividend income for individuals and other non-corporate taxpayers 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 15% for non-corporate 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.
Ordinary income dividends paid by a Fund to individuals and other non-corporate taxpayers will be treated as qualified dividend income that is subject to tax at a maximum rate of 15% to the extent of the amount of qualifying dividends received by the Fund from domestic corporations and from foreign corporations that are either incorporated in a possession of the United States, or are eligible for benefits under certain income tax treaties with the United States that include an exchange of information program. In addition, qualifying dividends include dividends paid with respect to stock of a foreign corporation that is readily tradable on an established securities market in the United States. However, dividends received by the Fund from foreign personal holding companies, foreign investment companies or PFICs are not qualifying dividends. If the qualifying dividend income received by a Fund is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.
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. However, the AMT on capital gain dividends and qualified dividend income paid by a Fund to a non-corporate shareholder may not exceed a maximum rate of 15%. 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 dividends 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 are not made from 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.
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 under the wash sale rules 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 15%. 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 after
such adjustment.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable distributions and/or redemption payments. 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 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign 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 adviser 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, and the portion of foreign source income consisting of qualified dividend income is reduced by approximately 57% to account for the tax rate differential. 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 August 23, 2004. 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, qualified dividend 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, if applicable, (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 Developing Markets Fund 0.50% 1.00% 1.00% N/A
AIM Global Health Care Fund 0.50 1.00 1.00 N/A
AIM Libra Fund 0.35 1.00 1.00 N/A
AIM Trimark Endeavor Fund 0.35 1.00 1.00 0.50
AIM Trimark Fund 0.35 1.00 1.00 0.50
AIM Trimark Small Companies Fund 0.35 1.00 1.00 0.50
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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.
The Funds may pay a service fee of 0.25% of the average daily net assets of the Class A, Class B, Class C and 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.
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.
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 J 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 October 31, 2003 and Appendix K 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 October 31, 2003.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service Agreements were approved by the Board, 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 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, 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 4.00% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. 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%.
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 ended October 31 are found in Appendix L.
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
made at the beginning of the one, five and ten year periods
at the end of the one, five, or ten year periods (or
fractional portion of such period).
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The average annual total returns for each Fund, with respect to its Class A, Class B, Class C and Class R shares, if applicable, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are found in Appendix M.
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.
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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.
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The cumulative total returns for each Fund, with respect to its Class A, Class B, Class C and Class R shares, if applicable, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are found in Appendix M.
Calculation of Certain Performance Data
AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may use a restated or a blended performance calculation to derive certain performance data shown in this Statement of Additional Information and in each Fund's advertisements and other sales material. If the Fund's 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 Fund's Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If the Fund's 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 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. If the Fund's 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 Fund's Class R shares.
A restated or blended performance calculation may be used to derive (i)
each Funds' standardized average annual total returns over a stated period and
(ii) each 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 made at the
D 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.
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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; and (2) Class B and Class C shares reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period.
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 April 30, 2004 are found in Appendix M.
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 the
DR 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.
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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 reflects the deduction of the maximum applicable CDSC on a redemption of shares held for the period .
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 April 30, 2004 are found in Appendix M.
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.
Certain Funds may participate in the initial public offering (IPO) market in some market cycles. Because of these Funds' small asset bases, any investment the Funds may make in IPOs may significantly affect these Funds' total returns. As the Funds' assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the Funds' total returns.
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 Financial World New York Times Barron's Forbes Pension World Best's Review Fortune Pensions & Investments Bloomberg Hartford Courant Inc. Personal Investor Broker World Institutional Investor Philadelphia Inquirer Business Week Insurance Forum The Bond Buyer Changing Times Insurance Week USA Today Christian Science Monitor Investor's Business Daily U.S. News & World Report Consumer Reports Journal of the American Wall Street Journal Economist Society of CLU & ChFC Washington Post FACS of the Week Kiplinger Letter CNN Financial Planning Money CNBC Financial Product News Mutual Fund Forecaster PBS Financial Services Week Nation's Business |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Morningstar, Inc.
Bloomberg Standard & Poor's
Factset Data Systems Strategic Insight
Thompson Financial
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Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Emerging Markets Fund Index MSCI Europe, Australasia, and Far East Index Lipper Natural Resources Fund Index MSCI World Health Care Sector Index Lipper Financial Services Fund Index MSCI World Index Lipper Multi-Cap Growth Fund Index Pacific Stock Exchange Technology 100 Index Lipper Health/Biotech Fund Index Russell 2000 Index Lipper Science and Technology Fund Index Russell Midcap Growth Index MSCI All Country World Free Index Standard & Poor's 500 Energy Index MSCI All Country World Free Energy Index Standard & Poor's 500 Stock Index MSCI All Country World Sector Index NYSE Finance Index MSCI Emerging Markets Free 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.
REGULATORY INQUIRIES AND PENDING LITIGATION
The mutual fund industry as a whole is currently subject to regulatory inquires and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to Section 529 college savings plans.
As described in the prospectuses for the AIM and INVESCO Funds, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to the INVESCO Funds and an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"), is the subject of three regulatory actions concerning market timing activity in the INVESCO Funds.
In addition, as described more fully below, IFG, AIM, certain related entities, certain of their current and former officers and/or certain of the AIM and INVESCO Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those described above.
As described more fully below, civil lawsuits related to many of the above issues have been filed against (depending upon the lawsuit) IFG, AIM, certain related entities, certain of their current and former officers, and/or certain of the AIM and INVESCO Funds and/or their trustees.
Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. This statement of additional information will be supplemented periodically to disclose any such additional regulatory actions, civil lawsuits and regulatory inquiries. Also, this statement of additional information will be supplemented periodically to disclose developments with respect to the three regulatory actions concerning market timing activity in the INVESCO Funds that are described in the AIM and INVESCO Funds' prospectuses.
Regulatory Inquiries Concerning IFG
IFG, certain related entities, certain of their current and former officers and/or certain of the INVESCO Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more INVESCO Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the Securities and Exchange Commission ("SEC"), the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Attorney General of the State of West Virginia, the West Virginia Securities Commission, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more INVESCO Funds.
Regulatory Inquiries Concerning AIM
AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to Section 529 college savings plans. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of New York ("NYAG"), the Commissioner of Securities for the State of Georgia, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the DOL, the Internal Revenue Service, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds.
Private Civil Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities and/or certain of their current and former officers) making allegations substantially similar to the allegations in the three regulatory actions concerning market timing activity in the INVESCO Funds that have been filed by the SEC, the NYAG and the State of Colorado against these parties. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the
Federal and state securities laws; (ii) violation of various provisions of the Employee Retirement Income Security Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; rescission; accounting for wrongfully gotten gains, profits and compensation; injunctive relief; disgorgement; equitable relief; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; declaration that the advisory agreement is unenforceable or void; refund of advisory fees; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix N-1.
The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. All such cases against IFG and the other AMVESCAP defendants filed to date have been conditionally or finally transferred to the District of Maryland in accordance with the Panel's directive. In addition, the proceedings initiated in state court have been removed by IFG to Federal court and transferred to the District of Maryland. The plaintiff in one such action continues to seek remand to state court.
Private Civil Actions Alleging Improper Use of Fair Value Pricing
Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and/or AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix N-2.
Private Civil Actions Alleging Excessive Advisory and Distribution Fees
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), A I M Distributors, Inc. ("AIM Distributors") and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix N-3.
Private Civil Actions Alleging Improper Distribution Fees Charged to Closed Funds
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM and/or AIM Distributors) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. A list identifying such
lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix N-4.
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") and/or certain of the trustees of the AIM and INVESCO Funds) alleging that the defendants improperly used the assets of the AIM and INVESCO Funds to pay brokers to aggressively push the AIM and INVESCO Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix N-5.
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 LONG-TERM DEBT RATINGS
Moody's corporate ratings areas follows:
Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock 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 in Aa rated bonds appear somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade , to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt 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, may 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 (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require 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: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt.
Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Baa: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. 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 MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features.
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 superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation 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.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal 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 meet its financial commitments 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 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
NR: Not Rated.
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 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.
These 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 rated 'B' 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 rated 'D' 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 Standard & Poor's believes such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks unique to notes. Notes due 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 it will be treated as a note); and source of payment (the more dependant the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is 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.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns,
governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood
of getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues 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 credit and research 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 of any security.
The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the
program concerned; it should not be assumed that these ratings apply to every
issue made under the program. In particular, in the case of non-standard issues,
i.e., those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events.
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 good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity.
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.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of 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," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
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 are valued on the basis of their prospects for achieving partial or full 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 categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
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 in the case of the higher 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 result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment default.
APPENDIX B
TRUSTEES AND OFFICERS
As of May 31, 2004
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 112 portfolios in the AIM and INVESCO Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with any predecessor entities, if any.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
------------------------------- ------- ------------------------------------------------ -----------------
INTERESTED PERSONS
Robert H. Graham (1) -- 1946 1998 Director and Chairman, A I M Management Group None
Trustee, Chairman and President Inc. (financial services holding company);
Director and Vice Chairman, AMVESCAP PLC and
Chairman of AMVESCAP PLC - AIM Division (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); Director and Chairman,
A I M Capital Management, Inc. (registered
investment advisor), A I M Distributors, Inc.
(registered broker dealer), AIM Investment
Services, Inc. (registered transfer agent), and
Fund Management Company (registered broker
dealer); and Chief Executive Officer, AMVESCAP
PLC - Managed Products
Mark H. Williamson (2) -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
President holding company); Director, Chairman and
President, A I M Advisors, Inc. (registered
investment advisor); Director, A I M Capital
Management, Inc. (registered investment advisor)
and A I M Distributors, Inc. (registered broker
dealer); Director and Chairman, AIM Investment
Services, Inc. (registered transfer agent), and
Fund Management Company (registered broker
dealer) and INVESCO Distributors, Inc.
(registered broker dealer); and Chief Executive
Officer, AMVESCAP PLC - AIM Division (parent of
AIM and a global investment management firm)
Formerly: Director, Chairman, President and
Chief Executive Officer, INVESCO Funds Group,
Inc.; President and Chief Executive Officer,
INVESCO Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC - Managed Products;
Chairman and Chief Executive Officer of
NationsBanc Advisors, Inc.; and Chairman of
NationsBanc Investments, Inc.
|
(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.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
------------------------------- ------- ------------------------------------------------ -----------------
INDEPENDENT TRUSTEES
Bob R . Baker - 1936 2003 Retired None
Trustee
Formerly: President and Chief Executive Officer,
AMC Cancer Research Center; and Chairman and
Chief Executive Officer, First Columbia
Financial Corporation
Frank S. Bayley -- 1939 1987 Retired Badgley Funds,Inc.
Trustee Formerly: Partner, law firm of Baker & McKenzie (registered
investment
company)
James T. Bunch - 1942 2003 Co-President and Founder, Green, Manning & Bunch None
Trustee Ltd., (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder Insurance
Corporation
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 of a number of public and private Cortland Trust,
Trustee business corporations, including the Boss Group, Inc. (Chairman)
Ltd. (private investment and management) and (registered investment
Magellan Insurance Company company); Annuity and
Formerly: Director, President and Chief Life Re (Holdings), Ltd.
Executive Officer, Volvo Group North (insurance company)
America, Senior Vice President, AB Volvo;
and director of various affiliated Volvo
companies
Edward K. Dunn, Jr. -- 1935 2001 Retired None
Trustee
Formerly: Chairman, Mercantile Mortgage 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 and Discovery
Texana Timber LP (sustainable forestry company) Global Education
Fund (non-profit)
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Trustee Frankel LLP Inc. (registered
investment
company)
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TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
------------------------------- ------- ------------------------------------------------ -----------------
Gerald J. Lewis - 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.,
Formerly: Associate Justice of the California
Court of Appeals
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 1987 Retired None
Trustee
Louis S. Sklar -- 1939 2001 Executive Vice President, Development and None
Trustee Operations, Hines Interests Limited Partnership
(real estate development company)
Larry Soll - 1942 2003 Retired None
Trustee
OTHER OFFICERS
Kevin M. Carome - 1956 2003 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc.
Legal Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President, A I
M Capital Management, Inc., A I M Distributors,
Inc. and AIM Investment Services, Inc.; and
Director, Vice President and General Counsel,
Fund Management Company
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.; and
Senior Vice President and General Counsel,
Liberty Funds Group, LLC
Stuart W. Coco -- 1955 2002 Managing Director and Director of Money Market N/A
Vice President Research and Special Projects, 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, A I N/A
Vice President M Advisors, Inc. and A I M Capital Management,
Inc.; and Vice President, AIM Investment
Services, Inc.
Sidney M. Dilgren - 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President and Advisors, Inc.
Treasurer
Formerly: Senior Vice President, AIM Investment
Services, Inc.; and Vice President, A I M
Distributors, Inc.
|
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIPS HELD
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS BY TRUSTEE
------------------------------- ------- ------------------------------------------------ -----------------
Karen Dunn Kelley - 1960 2004 Director of Cash Management, Managing Director N/A
Vice President and Chief Cash Management Officer, A I M Capital
Management, Inc.; Director and President, Fund
Management Company; and Vice President, A I M
Advisors, Inc.
Edgar M. Larsen -- 1940 2002 Director and Executive Vice President, A I M N/A
Vice President Management Group Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and Director,
Chairman, President, Director of Investments,
Chief Executive Officer and Chief Investment
Officer, A I M Capital Management, Inc.
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2003
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS REGISTERED TRADEMARK
------------------- --------------------------------------------- --------------------------------
Robert H. Graham AIM Developing Markets Fund 1 - $10,000 Over $100,000
AIM Libra Fund $1 - $10,000
Mark H. Williamson AIM Libra Fund $10,001 - $50,000 Over $100,000
Bob R. Baker -0- Over $100,000
Frank S. Bayley AIM Developing Markets Fund $1 - $10,000 $50,001 - $100,000
James T. Bunch -0- Over $100,000
Bruce L. Crockett -0- $10,001 - $50,000
Albert R. Dowden -0- Over $100,000
-0-
Edward K. Dunn, Jr. Over $100,000(3)
Jack M. Fields -0- Over $100,000(3)
Carl Frischling -0- Over $100,000(3)
Gerald J. Lewis -0- $50,001 - $100,000
Prema Mathai-Davis -0- $1 - $10,000(3)
Lewis F. Pennock -0- $50,001 - $100,000
Ruth H. Quigley AIM Developing Markets Fund $1 - $10,000 $1 - $10,000
Louis S. Sklar -0- Over $100,000(3)
Larry Soll -0- Over $100,000
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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, 2003:
ESTIMATED
ANNUAL BENEFITS
RETIREMENT UPON RETIREMENT
AGGREGATE BENEFITS FROM ALL AIM TOTAL
COMPENSATION ACCRUED FUNDS AND COMPENSATION
FROM THE BY ALL INVESCO FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) FUNDS(3) FUNDS(4)
------------------- ------------ ------------ ---------------- ------------
Bob R. Baker(5) $ 0 $ 32,635 $114,131 $154,554
Frank S. Bayley 6,967 131,228 90,000 159,000
James T. Bunch(5) 0 20,436 90,000 138,679
Bruce L. Crockett 7,013 46,000 90,000 160,000
Albert R. Dowden 6,967 57,716 90,000 159,000
Edward K. Dunn, Jr. 7,013 94,860 90,000 160,000
Jack M. Fields 6,971 28,036 90,000 159,000
Carl Frischling(6) 7,013 40,447 90,000 160,000
Gerald J. Lewis(5) 0 20,436 90,000 142,054
Prema Mathai-Davis 7,013 33,142 90,000 160,000
Lewis F. Pennock 7,013 49,610 90,000 160,000
Ruth H. Quigley 7,013 126,050 90,000 160,000
Louis S. Sklar 7,013 72,786 90,000 160,000
Larry Soll(5) 0 48,830 108,090 140,429
|
(1) Amounts shown are based on the fiscal year ended October 31, 2003. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended October 31, 2003, including earnings was $23,499.
(2) During the fiscal year ended October 31, 2003, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $21,910.
(3) These amounts represent the estimated annual benefits payable by the AIM Funds and INVESCO Funds upon the trustee's retirement. These estimated benefits assume each trustee serves until his or her normal retirement date and has ten years of service.
(4) All trustees currently serve as trustees of 19 registered investment companies advised by AIM.
(5) Messrs. Baker, Bunch, Lewis and Dr. Soll were elected trustee of the Trust on October 21, 2003 and therefore received no compensation from the Trust during the fiscal year ended October 31, 2003.
(6) During the fiscal year ended October 31, 2003, the Trust paid 14,812 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
PROXY VOTING POLICIES
Reviewed by the AIM Funds Board of Directors/Trustees February 19, 2004 Adopted by the Board of Directors of each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. and AIM Alternative Asset Management Company, Inc. June 26, 2003 as revised effective January 8, 2004.
A. PROXY POLICIES
Each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. and AIM Alternative Asset Management Company, Inc. (each an "AIM Advisor" and collectively "AIM") has the fiduciary obligation to, at all times, make the economic best interest of advisory clients the sole consideration when voting proxies of companies held in client accounts. As a general rule, each AIM Advisor shall vote against any actions that would reduce the rights or options of shareholders, reduce shareholder influence over the board of directors and management, reduce the alignment of interests between management and shareholders, or reduce the value of shareholders' investments. At the same time, AIM believes in supporting the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors, and the AIM portfolio managers who chose to invest in the companies. Therefore, on most issues, our votes have been cast in accordance with the recommendations of the company's board of directors, and we do not currently expect that trend to change. Although AIM's proxy voting policies are stated below, AIM's proxy committee considers all relevant facts and circumstances, and retains the right to vote proxies as deemed appropriate.
I. BOARDS OF DIRECTORS
A board that has at least a majority of independent directors is integral to good corporate governance. Key board committees, including audit, compensation and nominating committees, should be completely independent.
There are some actions by directors that should result in votes being withheld. These instances include directors who:
- Are not independent directors and (a) sit on the board's audit, compensation or nominating committee, or (b) sit on a board where the majority of the board is not independent;
- Attend less than 75 percent of the board and committee meetings without a valid excuse;
- Implement or renew a dead-hand or modified dead-hand poison pill;
- Sit on the boards of an excessive number of companies;
- Enacted egregious corporate governance or other policies or failed to replace management as appropriate;
- Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or
- Ignore a shareholder proposal that is approved by a majority of the shares outstanding.
Votes in a contested election of directors must be evaluated on a case-by-case basis, considering the following factors:
- Long-term financial performance of the target company relative to its industry;
- Management's track record;
- Portfolio manager's assessment;
- Qualifications of director nominees (both slates);
- Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and
- Background to the proxy contest.
II. INDEPENDENT AUDITORS
A company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence. We will support the reappointment of the company's auditors unless:
- It is not clear that the auditors will be able to fulfill their function;
- There is reason to believe the independent auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or
- The auditors have a significant professional or personal relationship with the issuer that compromises the auditors' independence.
III. COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider all incentives, awards and compensation, and compare them to a company-specific adjusted allowable dilution cap and a weighted average estimate of shareholder wealth transfer and voting power dilution.
- We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
- We will support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value.
- We will vote against plans that have any of the following structural features: ability to re-price underwater options without shareholder approval, ability to issue options with an exercise price below the stock's current market price, ability to issue reload options, or automatic share replenishment ("evergreen") feature.
- We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.
- We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages.
IV. CORPORATE MATTERS
We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers and acquisitions on a case by case basis, considering the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns.
- We will vote for merger and acquisition proposals that the proxy committee and relevant portfolio managers believe, based on their review of the materials, will result in financial and operating benefits, have a fair offer price, have favorable prospects for the combined
companies, and will not have a negative impact on corporate governance or shareholder rights.
- We will vote against proposals to increase the number of authorized shares of any class of stock that has superior voting rights to another class of stock.
- We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns.
- We will vote for proposals to institute open-market share repurchase plans in which all shareholders participate on an equal basis.
V. SHAREHOLDER PROPOSALS
Shareholder proposals can be extremely complex, and the impact on share value can rarely be anticipated with any high degree of confidence. The proxy committee reviews shareholder proposals on a case-by-case basis, giving careful consideration to such factors as: the proposal's impact on the company's short-term and long-term share value, its effect on the company's reputation, the economic effect of the proposal, industry and regional norms applicable to the company, the company's overall corporate governance provisions, and the reasonableness of the request.
- We will generally abstain from shareholder social and environmental proposals.
- We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
- We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted.
- We will generally vote for proposals to lower barriers to shareholder action.
- We will generally vote for proposals to subject shareholder rights plans to a shareholder vote. In evaluating these plans, we give favorable consideration to the presence of "TIDE" provisions (short-term sunset provisions, qualified bid/permitted offer provisions, and/or mandatory review by a committee of independent directors at least every three years).
VI. OTHER
- We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
- We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.
- We will vote any matters not specifically covered by these proxy policies and procedures in the economic best interest of advisory clients.
AIM's proxy policies, and the procedures noted below, may be amended from time to time.
B. PROXY COMMITTEE PROCEDURES
The proxy committee currently consists of representatives from the Legal and Compliance Department, the Investments Department and the Finance Department.
The committee members review detailed reports analyzing the proxy issues and have access to proxy statements and annual reports. The committee then discusses the issues and determines the vote. The committee shall give appropriate and significant weight to portfolio managers' views regarding a proposal's impact on shareholders. A proxy committee meeting requires a quorum of three committee members, voting in person or by proxy.
AIM's proxy committee shall consider its fiduciary responsibility to all clients when addressing proxy issues and vote accordingly. The proxy committee may enlist the services of reputable outside professionals and/or proxy evaluation services, such as Institutional Shareholder Services or any of its subsidiaries ("ISS"), to assist with the analysis of voting issues and/or to carry out the actual voting process. To the extent the services of ISS or another provider are used, the proxy committee shall periodically review the policies of that provider.
In addition to the foregoing, the following shall be strictly adhered to unless contrary action receives the prior approval of the Funds' Board of Directors/Trustees:
1. Other than by voting proxies and participating in Creditors' committees, AIM shall not engage in conduct that involves an attempt to change or influence the control of a company.
2. AIM will not publicly announce its voting intentions and the reasons therefore.
3. AIM shall not participate in a proxy solicitation or otherwise seek proxy-voting authority from any other public company shareholder.
4. All communications regarding proxy issues between the proxy committee and companies or their agents, or with fellow shareholders shall be for the sole purpose of expressing and discussing AIM's concerns for its advisory clients' interests and not for an attempt to influence or control management.
C. BUSINESS/DISASTER RECOVERY
If the proxy committee is unable to meet due to a temporary business interruption, such as a power outage, a sub-committee of the proxy committee may vote proxies in accordance with the policies stated herein. If the sub-committee of the proxy committee is not able to vote proxies, the sub-committee shall authorize ISS to vote proxies by default in accordance with ISS' proxy policies and procedures, which may vary slightly from AIM's.
D. RESTRICTIONS AFFECTING VOTING
If a country's laws allow a company in that country to block the sale of the company's shares by a shareholder in advance of a shareholder meeting, AIM will not vote in shareholder meetings held in that country, unless the company represents that it will not block the sale of its shares in connection with the meeting. Administrative or other procedures, such as securities lending, may also cause AIM to refrain from voting. Although AIM considers proxy voting to be an important shareholder right, the proxy committee will not impede a portfolio manager's ability to trade in a stock in order to vote at a shareholder meeting.
E. CONFLICTS OF INTEREST
The proxy committee reviews each proxy to assess the extent to which there may be a material conflict between AIM's interests and those of advisory clients. A potential conflict of interest situation may include where AIM or an affiliate manages assets for, administers an employee benefit plan for, provides other financial products or services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm AIM's relationship with the company. In order to avoid even the appearance of impropriety, the proxy committee will not take AIM's relationship with the company into account, and will vote the company's proxies in the best interest of the advisory clients, in accordance with these proxy policies and procedures.
To the extent that a committee member has any conflict of interest with respect to a company or an issue presented, that committee member should inform the proxy committee of such conflict and abstain from voting on that company or issue.
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
DECEMBER 1, 2003
PURPOSE AND BACKGROUND
In its trusteeship and management of mutual funds, AIM Trimark acts as fiduciary to the unitholders and must act in their best interests.
APPLICATION
AIM Trimark will make every effort to exercise all voting rights with respect to securities held in the mutual funds that it manages in Canada or to which it provides sub-advisory services, including a Fund registered under and governed by the US Investment Company Act of 1940, as amended (the "US Funds") (collectively, the "Funds"). Proxies for the funds distributed by Aim Trimark Investments and managed by an affiliate or a third party (a "Sub-Advisor") will be voted in accordance with the Sub-Advisor's policy, unless the sub-advisory agreement provides otherwise.
The portfolio managers have responsibility for exercising all proxy votes and in doing so, for acting in the best interest of the Fund. Portfolio managers must vote proxies in accordance with the Guidelines, as amended from time to time, a copy of which is attached to this policy.
When a proxy is voted against management's recommendation, the portfolio manager will provide to the CIO the reasons in writing for any vote in opposition to management's recommendation.
AIM Trimark may delegate to a third party the responsibility to vote proxies on behalf of all or certain Funds, in accordance with the Guidelines.
RECORDS MANAGEMENT
The Investment Department will endeavor to ensure that all proxies and notices are received from all issuers on a timely basis, and will maintain for all Funds
- A record of all proxies received;
- a record of votes cast;
- a copy of the reasons for voting against management; and
for the US Funds
- the documents mentioned above; and
- a copy of any document created by AIM Trimark that was material to making a decision how to vote proxies on behalf of a US Fund and that memorializes the basis of that decision.
If AIM Trimark relies on a third party to vote proxies, the third party shall retain on behalf of AIM Trimark
- a copy of the proxy statements; and
- a record of the vote cast
and the third party shall undertake to provide AIM Trimark with a copy of the proxy statements and the record promptly upon request.
All documents must be maintained and preserved in an easily accessible place i) for a period of 2 years where AIM Trimark carries on business in Canada and ii) for a period of 3 years thereafter at the same location or at any another location. If proxy voting has been delegated to a third party, the proxy statements and record of the vote cast must be available to Aim Trimark for a period of 6 years.
REPORTING
The CIO will report on proxy voting to the Fund Boards on an annual basis with respect to all Funds managed in Canada except the US Funds. The CIO will report on proxy voting to the Board of Directors of the US Funds as required from time to time.
Compliance will review the proxy voting records held by AIM Trimark on an annual basis.
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
PURPOSE
The purpose of this document is to describe AIM Trimark's general guidelines for voting proxies received from companies held in AIM Trimark's Toronto-based funds. Proxy voting for the funds managed on behalf of AIM Trimark on a sub-advised basis (i.e. by other AMVESCAP business units or on a third party basis) are subject to the proxy voting policies & procedures of those other entities. As part of its regular due diligence, AIM Trimark will review the proxy voting policies & procedures of any new sub-advisors to ensure that they are appropriate in the circumstances.
INTRODUCTION
AIM Trimark has the fiduciary obligation to ensure that the long-term economic best interest of unitholders is the key consideration when voting proxies of portfolio companies.
As a general rule, AIM Trimark shall vote against any actions that would:
- reduce the rights or options of shareholders,
- reduce shareholder influence over the board of directors and management,
- reduce the alignment of interests between management and shareholders, or
- reduce the value of shareholders' investments.
At the same time, since AIM Trimark's Toronto-based portfolio managers follow an investment discipline that includes investing in companies that are believed to have strong management teams, the portfolio managers will generally support the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors. Therefore, in most circumstances, votes will be cast in accordance with the recommendations of the company's board of directors.
While AIM Trimark's proxy voting guidelines are stated below, the portfolio managers will take into consideration all relevant facts and circumstances (including country specific considerations), and retain the right to vote proxies as deemed appropriate.
These guidelines may be amended from time to time.
CONFLICTS OF INTEREST
When voting proxies, AIM Trimark's portfolio managers assess whether there are material conflicts of interest between AIM Trimark's interests and those of unitholders. A potential conflict of interest situation may include where AIM Trimark or an affiliate manages assets for, provides other financial services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote in favour of management of the company may harm AIM Trimark's relationship with the company. In all situations, the portfolio managers will not take AIM Trimark's relationship with the company into account, and will vote the proxies in the best interest of the unitholders. To the extent that a portfolio manager has any conflict of interest with respect to a company or an issue presented, that portfolio manager should abstain from voting on that company or issue.
BOARDS OF DIRECTORS
We believe that a board that has at least a majority of independent directors is integral to good corporate governance. Unless there are restrictions specific to a company's home jurisdiction, key board committees, including audit and compensation committees, should be completely independent.
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes in an uncontested election of directors are evaluated on a case-by-case basis, considering factors that may include:
- Long-term company performance relative to a market index,
- Composition of the board and key board committees,
- Nominee's attendance at board meetings,
- Nominee's investments in the company,
- Whether the chairman is also serving as CEO, and
- Whether a retired CEO sits on the board.
VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors are evaluated on a case-by-case basis, considering factors that may include:
- Long-term financial performance of the target company relative to its industry,
- Management's track record,
- Background to the proxy contest,
- Qualifications of director nominees (both slates),
- Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met, and
- Stock ownership positions.
REIMBURSEMENT OF PROXY SOLICITATION EXPENSES
Decisions to provide reimbursement for dissidents waging a proxy contest are made on a case-by-case basis.
SEPARATING CHAIRMAN AND CEO
Shareholder proposals to separate the chairman and CEO positions should be evaluated on a case-by-case basis.
While we generally support these proposals, some companies have governance structures in place that can satisfactorily counterbalance a combined position. Voting decisions will take into account factors such as:
- Designated lead director, appointed from the ranks of the independent board members with clearly delineated duties;
- Majority of independent directors;
- All-independent key committees;
- Committee chairpersons nominated by the independent directors;
- CEO performance is reviewed annually by a committee of outside directors; and
- Established governance guidelines.
MAJORITY OF INDEPENDENT DIRECTORS
While we generally support shareholder proposals asking that a majority of directors be independent, each proposal should be evaluated on a case-by-case basis.
We generally vote for shareholder proposals that request that the board's audit, compensation, and/or nominating committees be composed exclusively of independent directors.
STOCK OWNERSHIP REQUIREMENTS
We believe that individual directors should be appropriately compensated and motivated to act in the best interests of shareholders. Share ownership by directors better aligns their interests with those of other shareholders. Therefore, we believe that meaningful share ownership by directors is in the best interest of the company.
We generally vote for proposals that require a certain percentage of a director's compensation to be in the form of common stock.
SIZE OF BOARDS OF DIRECTORS
We believe that the number of directors is important to ensuring the board's effectiveness in maximizing long-term shareholder value. The board must be large enough to allow it to adequately discharge its responsibilities, without being so large that it becomes cumbersome.
While we will we prefer a board of no fewer than 5 and no more than 16 members, each situation will be considered on a case-by-case basis taking into consideration the specific company circumstances.
CLASSIFIED OR STAGGERED BOARDS
In a classified or staggered board, directors are typically elected in two or more "classes", serving terms greater than one year.
We prefer the annual election of all directors and will generally not support proposals that provide for staggered terms for board members. We recognize that there may be jurisdictions where staggered terms for board members is common practice and, in such situations, we will review the proposals on a case-by-case basis.
DIRECTOR INDEMNIFICATION AND LIABILITY PROTECTION
We recognize that many individuals may be reluctant to serve as corporate directors if they were to be personally liable for all lawsuits and legal costs. As a result, limitations on directors' liability can benefit the corporation and its shareholders by helping to attract and retain qualified directors while providing recourse to shareholders on areas of misconduct by directors.
We generally vote for proposals that limit directors' liability and provide indemnification as long as the arrangements are limited to the director acting honestly and in good faith with a view to the best interests of the corporation and, in criminal matters, are limited to the director having reasonable grounds for believing the conduct was lawful.
AUDITORS
A strong audit process is a requirement for good corporate governance. A significant aspect of the audit process is a strong relationship with a knowledgeable and independent set of auditors.
RATIFICATION OF AUDITORS
We believe a company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence.
We generally vote for the reappointment of the company's auditors unless:
It is not clear that the auditors will be able to fulfill their function;
There is reason to believe the auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or
The auditors have a significant professional or personal relationship with the issuer that compromises their independence.
DISCLOSURE OF AUDIT VS. NON-AUDIT FEES
Understanding the fees earned by the auditors is important for assessing auditor independence. Our support for the re-appointment of the auditors will take into consideration whether the management information circular contains adequate disclosure about the amount and nature of audit vs. non-audit fees.
There may be certain jurisdictions that do not currently require disclosure of audit vs. non-audit fees. In these circumstances, we will generally support proposals that call for this disclosure.
COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider each compensation plan in its entirety (including all incentives, awards and other compensation) to determine if the plan provides the right incentives to managers and directors and is reasonable on the whole.
The following are specific guidelines dealing with some of the more common features of compensation programs (features not specifically itemized below will be considered on a case-by-case basis taking into consideration the general principles described above):
CASH COMPENSATION AND SEVERANCE PACKAGES
We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages.
EQUITY BASED PLANS - DILUTION
We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
EMPLOYEE STOCK PURCHASE PLANS
We will generally vote for the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value. It is recognized that country specific circumstances may exist (e.g. tax issues) that require proposals to be reviewed on a case-by-case basis.
LOANS TO EMPLOYEES
We will vote against the corporation making loans to employees to allow employees to pay for stock or stock options.
STOCK OPTION PLANS - BOARD DISCRETION
We will vote against stock option plans that give the board broad discretion in setting the terms and conditions of the programs. Such programs should be submitted with detail and be reasonable in the circumstances regarding their cost, scope, frequency and schedule for exercising the options.
STOCK OPTION PLANS - INAPPROPRIATE FEATURES
We will generally vote against plans that have any of the following structural features:
- ability to re-price "underwater" options without shareholder approval,
- ability to issue options with an exercise price below the stock's current market price,
- ability to issue "reload" options, or
- automatic share replenishment ("evergreen") features.
STOCK OPTION PLANS - DIRECTOR ELIGIBILITY
We will generally support stock option plans for directors as long as the terms and conditions of director options are clearly defined and are reasonable.
STOCK OPTION PLANS - REPRICING
We will vote for proposals to re-price options if there is a value-for-value (rather than a share-for-share) exchange.
STOCK OPTION PLANS - VESTING
We will vote against stock option plans that are 100% vested when granted.
STOCK OPTION PLANS - AUTHORIZED ALLOCATIONS
We will generally vote against stock option plans that authorize allocation of 25% or more of the available options to any one individual.
STOCK OPTION PLANS - CHANGE IN CONTROL PROVISIONS
We will vote against stock option plans with change in control provisions that allow option holders to receive more for their options than shareholders would receive for their shares.
STOCK OPTION PLANS - EXPENSING
We will consider proposals that deal with the expensing of the costs associated with stock option plans on a case-by-case basis.
CORPORATE MATTERS
We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers & acquisitions on a case-by-case basis, taking into consideration the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns.
COMMON STOCK AUTHORIZATION
We will review proposals to increase the number of shares of common stock authorized for issue on a case-by-case basis.
DUAL CLASS SHARE STRUCTURES
Dual class share structures involve the creation of a second class of common stock with either superior or inferior voting rights to those of the existing class of stock. Such share structures violates the principle of "one share, one vote", leading to the possibility that the company may take actions or fail to take actions without the support of a true majority of shareholders.
We will generally vote against proposals to create or extend dual class share structures where certain stockholders have superior or inferior voting rights to another class of stock.
STOCK SPLITS
We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns.
REVERSE STOCK SPLITS
We will vote for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split.
SHARE REPURCHASE PROGRAMS
We will vote against proposals to institute open-market share repurchase plans if all shareholders do not participate on an equal basis.
REINCORPORATION
Reincorporation involves re-establishing the company in a different legal jurisdiction.
We will generally vote for proposals to reincorporate the company provided that the board and management have demonstrated sound financial or business reasons for the move. Proposals to reincorporate will not be supported if solely as part of an anti-takeover defense or as a way to limit directors' liability.
MERGERS & Acquisitions
We will vote for merger & acquisition proposals that the relevant portfolio managers believe, based on their review of the materials:
- will result in financial and operating benefits,
- have a fair offer price,
- have favourable prospects for the combined companies, and
- will not have a negative impact on corporate governance or shareholder rights.
SHAREHOLDER PROPOSALS
We recognize that to effectively manage a corporation, directors and management must consider not only the interests of shareholders, but the interests of employees, customers, suppliers, creditors and the general community as well. Shareholder proposals can be extremely complex, and the impact on the interests of all stakeholders can rarely be anticipated with a high degree of confidence.
Shareholder proposals will be reviewed on a case-by-case basis with consideration of factors such as:
- the proposal's impact on the company's short-term and long-term share value,
- its effect on the company's reputation,
- the economic effect of the proposal,
- industry and regional norms applicable to the company,
- the company's overall corporate governance provisions, and
- the reasonableness of the request.
We will generally not support proposals that place arbitrary or artificial constraints on the board, management or the company.
ORDINARY BUSINESS PRACTICES
We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
PROTECTION OF SHAREHOLDER RIGHTS
We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted.
BARRIERS TO SHAREHOLDER ACTION
We will generally vote for proposals to lower barriers to shareholder action.
SHAREHOLDER RIGHTS PLANS
We will generally vote for proposals to subject shareholder rights plans to a shareholder vote.
OTHER
We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
We will vote against any proposals to authorize the company to conduct any other business that is not described in the proxy statement.
APPENDIX E
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 August 2, 2004.
AIM DEVELOPING MARKETS FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House Account
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street
NY, NY 10001-2402 12.99% 5.01% 6.56%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor 6.17% 5.65% 21.70%
Jacksonville, FL 32246-6484
Morgan Stanley DW
Attn: Mutual Fund Operations
3 Harborside Pl, Floor 6
Jersey City, NJ 07311-3907 -- 6.02% --
|
AIM GLOBAL HEALTH CARE FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House Account
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street
New York, NY 10001-2402 7.44% 6.84% --
|
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor 7.61% 5.79% 11.89%
Jacksonville, FL 32246-6484
|
AIM LIBRA FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
--------------------------------------------------------------------
PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF OF
PRINCIPAL HOLDER RECORD RECORD RECORD
--------------------------------------------------------------------------------------------------------------------
Charles T. Bauer
c/o AIM Management Group Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1113 15.72%(1) -- --
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 21.16% 18.63% 51.62%
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Jonathan C. Schoolar Sep.Prop.
6640 Dogwood Creek
Austin, TX 78746-1318 6.04%(1) -- --
|
AIM TRIMARK FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES 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
------------------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.(1)
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103 -- 8.34% 8.47% 100.00% 100.00%
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration -- 8.29% 6.62% -- --
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Morgan Stanley DW
Attn Mutual Fund Operations
3 Harborside Pl, Floor 6
Jersey City, NJ 07311-3907 -- -- 7.35%
|
(1) Owned of record and beneficially.
AIM TRIMARK ENDEAVOR FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES 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
------------------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.(1)
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103 -- 7.75% 9.07% 100.00% --
AIM Conservative Asset Allocation Fund
Omnibus Account
c/o AIM Advisors -- -- -- -- 98.09%
11 E. Greenway Plz, Suite 100
Houston, TX 77046-1113
Merrill Lynch Pierce Fenner & Smith
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor 36.09% -- 51.17% -- --
Jacksonville, FL 32246-6484
|
AIM TRIMARK SMALL COMPANIES FUND
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
SHARES SHARES SHARES SHARES 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
------------------------------------------------------------------------------------------------------------------------------
A I M Advisors, Inc.(1)
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103 -- 8.80% 13.90% -- --
Merrill Lynch Pierce Fenner & Smith
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East 6.14% -- 18.55% -- --
2nd Floor
Jacksonville, FL 32246-6484
AIM Moderate Asset Allocation Fund
Omnibus Account
c/o AIM Advisors -- -- -- -- 99.51%
11 E. Greenway Plz, Suite 100
Houston, TX 77046-1113
Bird Dog Trading
Derek D. Wilson
110 Gray Street
Houston, TX 77002-8500 -- -- -- 39.30% --
|
(1) Owned of record and beneficially.
MANAGEMENT OWNERSHIP
As of August 2, 2004, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund.
APPENDIX F
MANAGEMENT FEES
For the last three fiscal years ended October 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 2003 2002
--------- --------------------------------------------- -------------------------------------------
NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAYABLE FEE PAYABLE FEE WAIVERS FEE PAYABLE
----------- ----------- ----------- ----------- ----------- -----------
AIM Developing Markets
Fund $1,755,280 $598,343 $1,156,937 $1,984,365 $1,032,501 $ 951,864
AIM Global Health Care
Fund 7,101,823 7,033 7,094,790 8,509,208 5,611 8,503,597
AIM Libra Fund (1) 95,890 95,890 -0- N/A N/A N/A
AIM Trimark Endeavor
Fund (2) N/A N/A N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A N/A N/A
AIM Trimark Small
Companies Fund (2) N/A N/A N/A N/A N/A N/A
FUND NAME 2001
--------- -------------------------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT
FEE PAYABLE FEE WAIVERS FEE PAYABLE
----------- ----------- -----------
AIM Developing Markets
Fund $1,720,644 $880,540 $ 840,104
AIM Global Health Care
Fund 7,123,437 1,495 7,122,942
AIM Libra Fund (1) N/A N/A N/A
AIM Trimark Endeavor
Fund (2) N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A
AIM Trimark Small
Companies Fund (2) N/A N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
APPENDIX G
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended October 31:
FUND NAME 2003 2002 2001
--------- ---- ---- ----
AIM Developing Markets Fund $ 50,000 $ 50,000 $ 50,000
AIM Global Health Care Fund 185,138 168,501 134,681
AIM Libra Fund(1) 50,000 N/A N/A
AIM Trimark Endeavor Fund(2) N/A N/A N/A
AIM Trimark Fund(2) N/A N/A N/A
AIM Trimark Small Companies Fund(2) N/A N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
APPENDIX H
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended October 31 were as follows:
FUND 2003 2002 2001
---- ---- ---- ----
AIM Developing Markets Fund $ 858,656 $ 770,314 $ 847,173
AIM Global Health Care Fund (2) 2,353,702 4,231,045 2,571,259
AIM Libra Fund (3) 164,599 N/A N/A
AIM Trimark Endeavor Fund (4) N/A N/A N/A
AIM Trimark Fund (4) N/A N/A N/A
AIM Trimark Small Companies Fund (4) N/A N/A N/A
|
(1) Disclosure regarding brokerage commissions is limited to commissions paid on agency trades and designated as such on the trade confirm.
(2) The variation in brokerage commission paid by the fund for the fiscal year ended October 31, 2003, as compared to the fiscal year ended October 31, 2002, was due to a decrease in cash inflows and portfolio turnover. The variation in brokerage commissions paid by the Fund for the fiscal year ended October 31, 2002, as compared to the fiscal year ended October 31, 2001, was due to a significant increase in international trading. International trades tend to have considerably higher commissions than domestic trades.
(3) Commenced operations on November 1, 2002.
(4) Commenced operations on November 4, 2003.
APPENDIX I
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended October 31, 2003, 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 Developing Markets Fund $ 717,968 $ 1,870
AIM Global Health Care Fund 198,968,837 294,770
AIM Libra Fund (1) 1,041,945 3,543
AIM Trimark Endeavor Fund (2) N/A N/A
AIM Trimark Fund (2) N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
During the last fiscal year ended October 31, 2003, the following Fund held securities issued by the following companies, which are "regular" brokers or dealers of the Funds identified below:
FUND SECURITY MARKET VALUE
---- -------- ------------
AIM Libra Fund
Ameritrade Holding Corp. Common Stock $ 391,468
E*TRADE Financial Corp. Common Stock 220,420
Knight Trading Group, Inc. Common Stock 390,288
|
APPENDIX J
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 or period ended October 31, 2003 follows:
CLASS A CLASS B CLASS C CLASS R
FUND SHARES SHARES SHARES SHARES (3)
---- ------ ------ ------ ----------
AIM Developing Markets Fund $ 713,072 $ 279,469 $ 34,355 N/A
AIM Global Health Care Fund 2,582,635 1,745,344 433,411 N/A
AIM Libra Fund (1) 30,946 14,276 10,119 N/A
AIM Trimark Endeavor Fund (2) N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
(3) Class R shares commenced operations on April 30, 2004 therefore no amounts were paid.
APPENDIX K
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 year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ------- -------- ------------ ------------
AIM Developing Markets Fund $126,899 $18,640 $61,574 $ 0 $ 505,959
AIM Global Health Care Fund 164,750 23,644 74,321 0 2,319,920
AIM Libra Fund (1) 21,593
AIM Trimark Endeavor Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A N/A N/A N/A
|
An estimate by category of the allocation of actual fees paid by Class B shares of the Funds during the year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ------- -------- ------------ ------------
AIM Developing Markets Fund $ 518 $ 0 $ 1,037 $ 209,602 $ 68,312
AIM Global Health Care Fund 30,886 4,496 13,528 1,309,008 387,426
AIM Libra Fund (1) 438 62 250 6,650 1,466
AIM Trimark Endeavor Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A N/A N/A N/A
|
An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the year ended October 31, 2003, follows:
PRINTING & UNDERWRITERS DEALERS
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION
----------- ------- -------- ------------ ------------
AIM Developing Markets Fund $ 0 $ 0 $ 0 $ 6,361 $ 27,994
AIM Global Health Care Fund 10,609 1,530 3,642 87,403 330,227
AIM Libra Fund (1) 1,218 268 0 4,915 815
AIM Trimark Endeavor Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A N/A N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
Class R shares of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund commenced operations on April 30, 2004 therefore no information regarding the allocation of fees paid by Class R shares has been provided.
APPENDIX L
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 October 31:
2003 2002 2001
------------------ -------------------- --------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
AIM Developing Markets Fund $ 68,195 $ 12,641 $ 124,830 $ 22,655 $ 70,148 $ 12,631
AIM Global Health Care Fund 709,375 128,248 1,703,543 300,015 1,789,730 303,612
AIM Libra Fund (1) 164,685 23,736 N/A N/A N/A N/A
AIM Trimark Endeavor Fund (2) N/A N/A N/A N/A N/A N/A
AIM Trimark Fund (2) N/A N/A N/A N/A N/A N/A
AIM Trimark Small Companies Fund (2) N/A N/A N/A N/A N/A N/A
|
The following chart reflects the contingent deferred sales charges paid by Class A, Class B, Class C and Class R, if any, shareholders and retained by AIM Distributors for the last three fiscal years ended October 31:
2003 2002 2001
---- ---- ----
AIM Developing Markets Fund $ 20,360 $ 2,677 $ 10,586
AIM Global Health Care Fund 10,199 30,996 25,075
AIM Libra Fund (1) 368 N/A N/A
AIM Trimark Endeavor Fund (2, 3) N/A N/A N/A
AIM Trimark Fund (2, 3) N/A N/A N/A
AIM Trimark Small Companies Fund (2, 3) N/A N/A N/A
|
(1) Commenced operations on November 1, 2002
(2) Commenced operations on November 4, 2003
(3) Class R shares commenced operations on April 30, 2004 therefore no contingent deferred sales charges for Class R shares have been reflected in the chart.
APPENDIX M
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 45.71% 2.95% 0.68% N/A 01/11/94
AIM Global Health Care Fund 20.20% 7.48% 13.26% N/A 08/07/89
AIM Libra Fund 18.05% N/A N/A 11.75% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 2.84% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.66% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A -0.19% (2) 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 47.47% 3.02% N/A -1.44% 11/03/97
AIM Global Health Care Fund 20.53% 7.69% 13.37% N/A 04/01/93
AIM Libra Fund 19.09% N/A N/A 12.73% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 3.60% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.20% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 0.30% (2) 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Returns are cumulative
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 51.40% 3.34% N/A 8.11% 03/01/99
AIM Global Health Care Fund 24.51% 7.99% N/A 9.10% 03/01/99
AIM Libra Fund 23.19% N/A N/A 15.30% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 7.60% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A 3.80% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 4.40% (2) 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Trimark Endeavor Fund (3) N/A N/A N/A 8.72% 11/04/03
AIM Trimark Fund (3) N/A N/A N/A 5.02% 11/04/03
AIM Trimark Small Companies Fund (3) N/A N/A N/A 5.52% 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 45.71% 15.65% 7.02% N/A 01/11/94
AIM Global Health Care Fund 20.20% 43.40% 247.29% N/A 08/07/89
AIM Libra Fund 18.05% N/A N/A 18.05% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 2.84% 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.66% 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A -0.19% 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Returns are cumulative.
(3) Class R shares were first offered on April 30, 2004. Prior to that date are hypothetical results based on Class A share returns at net asset value, adjusted to reflect additional Class R 12b-1 fees. The inception date listed is that of the Class A shares.
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 47.47% 16.05% N/A -8.99% 11/03/97
AIM Global Health Care Fund 20.53% 44.84% 250.67% N/A 04/01/93
AIM Libra Fund 19.09% N/A N/A 19.59% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 3.60% 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.20% 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 0.30% 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 51.40% 17.84% N/A 49.55% 03/01/99
AIM Global Health Care Fund 24.51% 46.89% N/A 56.81% 03/01/99
AIM Libra Fund 23.19% N/A N/A 23.69% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 7.60% 11/04/03
AIM Trimark Fund (1) N/A N/A N/A 3.80% 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 4.40% 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Trimark Endeavor Fund (2) N/A N/A N/A 8.72% 11/04/03
AIM Trimark Fund (2) N/A N/A N/A 5.02% 11/04/03
AIM Trimark Small Companies Fund (2) N/A N/A N/A 5.52% 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Class R shares were first offered on April 30, 2004. Prior to that date are hypothetical results based on Class A share returns at net asset value, adjusted to reflect additional Class R 12b-1 fees. The inception date listed is that of the Class A shares.
AVERAGE ANNUAL TOTAL RETURN (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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 45.67% 2.78% -0.13% N/A 01/11/94
AIM Global Health Care Fund 20.20% 5.69% 10.30% N/A 08/07/89
AIM Libra Fund 18.02% N/A N/A 11.74% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 2.84% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.66% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A -0.19% (2) 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 47.47% 2.98% N/A -1.77% 11/03/97
AIM Global Health Care Fund 20.53% 5.77% 10.31% N/A 04/01/93
AIM Libra Fund 19.06% N/A N/A 12.71% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 3.60% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.20% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 0.30% (2) 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Returns are cumulative
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 C shares, for the one, five and ten year periods (or since inception if less than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 51.40% 3.29% N/A 8.06% 03/01/99
AIM Global Health Care Fund 24.51% 6.09% N/A 7.24% 03/01/99
AIM Libra Fund 23.16% N/A N/A 15.29% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 7.60% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A 3.80% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 4.40% (2) 11/04/03
|
AVERAGE ANNUAL TOTAL RETURN (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 than ten years) ended April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 29.76% 2.42% 0.08% N/A 01/11/94
AIM Global Health Care Fund 13.13% 5.64% 9.95% N/A 08/07/89
AIM Libra Fund 11.74% N/A N/A 10.02% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 1.84% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.43% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A -0.12% (2) 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Returns are cumulative
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 30.85% 2.56% N/A -1.40% 11/03/97
AIM Global Health Care Fund 13.34% 5.78% 10.00% N/A 04/01/93
AIM Libra Fund 12.42% N/A N/A 10.86% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 2.34% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A -0.13% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 0.19% (2) 11/04/03
|
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
---------------------------------------------------------------------
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------- ------ ------- -------- --------- ----
AIM Developing Markets Fund 33.41% 2.83% N/A 7.01% 03/01/99
AIM Global Health Care Fund 15.93% 6.06% N/A 7.06% 03/01/99
AIM Libra Fund 15.08% N/A N/A 13.07% 11/01/02
AIM Trimark Endeavor Fund (1) N/A N/A N/A 4.94% (2) 11/04/03
AIM Trimark Fund (1) N/A N/A N/A 2.47% (2) 11/04/03
AIM Trimark Small Companies Fund (1) N/A N/A N/A 2.86% (2) 11/04/03
|
(1) Commenced operations on November 4, 2003
(2) Returns are cumulative
APPENDIX N
REGULATORY INQUIRIES AND PENDING LITIGATION
APPENDIX N-1
PENDING LITIGATION ALLEGING MARKET TIMING
The following civil lawsuits, including purported class action and shareholder derivative suits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG, AIM, AIM Management, AMVESCAP and/or certain related entities and individuals and are related to the three regulatory actions concerning market timing activity in the INVESCO Funds that have been filed by the SEC, the Attorney General of the State of New York and the State of Colorado against these parties. These lawsuits either have been served or have had service of process waived as of July 14, 2004. All of these lawsuits have been conditionally or finally transferred to the United States District Court for the District of Maryland in accordance with the directive of the Judicial Panel on Multidistrict Litigation (Case No. 04-MD-15864; In Re AIM, Artisan, INVESCO, Strong and T. Rowe Price Mutual Fund Litigation). The plaintiffs in one of these lawsuits (Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc. et al.) continue to seek remand to state court.
RICHARD LEPERA, On Behalf Of Himself And All Others Similarly Situated,
v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND
FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in
the District Court, City and County of Denver, Colorado, (Civil Action
No. 03-CV-7600), filed on October 2, 2003. This claim alleges: common
law breach of fiduciary duty; common law breach of contract; and common
law tortious interference with contract. The plaintiff in this case is
seeking: compensatory and punitive damages; injunctive relief;
disgorgement of revenues and profits; and costs and expenses, including
counsel fees and expert fees.
MIKE SAYEGH, On Behalf of the General Public, v. JANUS CAPITAL
CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND,
EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT
MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES
INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP
MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL
MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT
H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST
COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE
CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL MANAGEMENT L.P.,
ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA FINANCIAL INC.,
ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES SCHAFFRAN, MARSH
& MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT
MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES 1-500, in the
Superior Court of the State of California, County of Los Angeles (Case
No. BC304655), filed on October 22, 2003 and amended on December 17,
2003 to substitute INVESCO Funds Group, Inc. and Raymond R. Cunningham
for unnamed Doe defendants. This claim alleges unfair business
practices and violations of Sections 17200 and 17203 of the California
Business and Professions Code. The plaintiff in this case is seeking:
injunctive relief; restitution, including pre-judgment interest; an
accounting to determine the amount to be returned by the defendants and
the amount to be refunded to the public; the creation of an
administrative process whereby injured customers of the defendants
receive their losses; and counsel fees.
RAJ SANYAL, Derivatively On Behalf of NATIONS INTERNATIONAL EQUITY
FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER,
CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B.
WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS,
THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B.
CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT,
BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF
AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL MANAGEMENT, LLC, AND
NATIONS FUNDS TRUST, in the Superior Court Division, State of North
Carolina (Civil Action No. 03-CVS-19622), filed on November 14, 2003.
This claim alleges common law breach of fiduciary duty; abuse of
control; gross mismanagement; waste of fund assets; and unjust
enrichment. The plaintiff in this case is seeking: injunctive relief,
including imposition of a constructive trust; damages; restitution and
disgorgement; and costs and expenses, including counsel fees and expert
fees.
L. SCOTT KARLIN, Derivatively On Behalf Of INVESCO FUNDS GROUP, INC. v.
AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the
United States District Court, District of Colorado (Civil Action No.
03-MK-2406), filed on November 28, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act of 1940 ("Investment
Company Act"), and common law breach of fiduciary duty. The plaintiff
in this case is seeking damages and costs and expenses, including
counsel fees and expert fees.
RICHARD RAVER, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 03-F-2441), filed on December 2,
2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act of 1933 (the "Securities Act"); Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5
under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the
Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
JERRY FATTAH, Custodian For BASIM FATTAH, Individually and On Behalf of
All Others Similarly Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES
FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
EQUITY FUND (formerly known as INTERNATIONAL BLUE CHIP VALUE FUND),
INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR
FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND,
AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO
TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY
FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN
FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH &
INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND,
INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (collectively known as the
"INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM
SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND
FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC.
(collectively known as the "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC,
INVESCO FUNDS GROUP INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS
KOLBE, EDWARD STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC.,
CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY
CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States
District Court, District of Colorado (Civil Action No. 03-F-2456),
filed on December 4, 2003. This claim alleges violations of: Sections
11 and 15 of Securities Act; Sections 10(b) and 20(a) of the Exchange
Act; Rule 10b-5 under the Exchange Act; and Section 206 of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"). The
plaintiffs in this case are seeking: compensatory damages; rescission;
return of fees paid; accounting for wrongfully gotten gains, profits
and compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.
EDWARD LOWINGER AND SHARON LOWINGER, Individually and On Behalf of all
Others Similarly Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
(FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE
FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM
MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO
TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S
TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO
LATIN AMERICAN GROWTH FUND (collectively known as the "INVESCO FUNDS"),
AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (collectively known as
the "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
INC., TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN
MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 03-CV-9634), filed on December 4, 2003. This claim alleges
violations of: Sections 11 and 15 of the Securities Act; Sections 10(b)
and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
JOEL GOODMAN, INDIVIDUALLY and On behalf Of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in
the District Court, City and County of Denver, Colorado (Case Number
03CV9268), filed on December 5, 2003. This claim alleges common law
breach of fiduciary duty and aiding and abetting breach of fiduciary
duty. The plaintiffs in this case are seeking: injunctive relief;
accounting for all damages and for all profits and any special benefits
obtained; disgorgement; restitution and damages; costs and
disbursements, including counsel fees and expert fees; and equitable
relief.
STEVEN B. EHRLICH, Custodian For ALEXA P. EHRLICH, UGTMA/FLORIDA, AND
DENNY P. JACOBSON, INDIVIDUALLY and On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
(collectively known as the "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (collectively known as the "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA
INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
DOES 1-100, in the United States District Court, District of Colorado
(Civil Action No. 03-N-2559), filed on December 17, 2003. This claim
alleges violations of: Sections 11 and 15 of the Securities Act;
Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in
this case are seeking: compensatory damages; rescission; return of fees
paid; accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
JOSEPH R. RUSSO, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
(collectively known as the "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (collectively known as the "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA
INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
DOES 1-100, in the United States District Court, Southern District of
New York (Civil Action No. 03-CV-10045), filed on December 18, 2003.
This claim alleges violations of: Sections 11 and 15 of the Securities
Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in
this case are seeking: compensatory damages; rescission; return of fees
paid; accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
MIRIAM CALDERON, Individually and On Behalf of All Others Similarly
Situated, v. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC.,
AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER,
JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM,
AND DOES 1-100, in the United States District Court, District of
Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003. This
claim alleges violations of Sections 404, 405 and 406B of the Employee
Retirement Income Security Act ("ERISA"). The plaintiffs in this case
are seeking: declarations that the defendants breached their ERISA
fiduciary duties and that they are not entitled to the protection of
Section 404(c)(1)(B) of ERISA; an order compelling the defendants to
make good all losses to a particular retirement plan described in this
case (the "Retirement Plan") resulting from the defendants' breaches of
their fiduciary duties, including losses to the Retirement Plan
resulting from imprudent investment of the Retirement Plan's assets,
and to restore to the Retirement Plan all profits the defendants made
through use of the Retirement Plan's assets, and to restore to the
Retirement Plan all profits which the participants would have made if
the defendants had fulfilled their fiduciary obligations; damages on
behalf of the Retirement Plan; imposition of a constructive trust,
injunctive relief, damages suffered by the Retirement Plan, to be
allocated proportionately to the participants in the Retirement Plan;
restitution and other costs and expenses, including counsel fees and
expert fees.
PAT B. GORSUCH and GEORGE L. GORSUCH v. INVESCO FUNDS GROUP, INC. AND
AIM ADVISER, INC., in the United States District Court, District of
Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003.
This claim alleges violations of Sections 15(a), 20(a) and 36(b) of the
Investment Company Act. The plaintiffs in this case are seeking:
rescission and/or voiding of the investment advisory agreements; return
of fees paid; damages; and other costs and expenses, including counsel
fees and expert fees.
LORI WEINRIB, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR
SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN
MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 04-CV-00492), filed on January 21, 2004. This claim alleges
violations of: Sections 11 and 15 of the 1933 Act; Sections 10(b) and
20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
ROBERT S. BALLAGH, JR., Individually and On Behalf of All Others
Similarly Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS,
INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS,
INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0152), filed on January
28, 2004. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of
the Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
JONATHAN GALLO, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY
FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND,
INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND,
INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE
FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN,
CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD.,
CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States
District Court, District of Colorado (Civil Action No. 04-MK-0151),
filed on January 28, 2004. This claim alleges violations of: Sections
11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the
Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b),
36(a) and 36(b) of the Investment Company Act. The claim also alleges
common law breach of fiduciary duty. The plaintiffs in this case are
seeking: damages; pre-judgment and post-judgment interest; counsel fees
and expert fees; and other relief.
EILEEN CLANCY, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN
GROWTH FUND (Collectively known as the "INVESCO FUNDS"), AIM STOCK
FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND
FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET
FUNDS INC., AIM INTERNATIONAL FUNDS INC. (Collectively known as the
"INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC.,
TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United
States District Court, Southern District of New York (Civil Action No.
04-CV-0713), filed on January 30, 2004. This claim alleges violations
of Sections 11 and 15 of the Securities Act. The plaintiffs in this
case are seeking: compensatory damages, rescission; return of fees
paid; and other costs and expenses, including counsel fees and expert
fees.
SCOTT WALDMAN, On Behalf of Himself and All Others Similarly Situated,
v. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM
STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS
INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM, in the United States
District Court, Southern District of New York (Civil Action No.
04-CV-00915), filed on February 3, 2004. This claim alleges violations
of Sections 11 and 15 of the Securities Act and common law breach of
fiduciary duty. The plaintiffs in this case are seeking compensatory
damages; injunctive relief; and costs and expenses, including counsel
fees and expert fees.
CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF Themselves and
All Others Similarly Situated, v. INVESCO FUNDS GROUP, INC., INVESCO
STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States
District Court, District of Colorado (Civil Action No. 04-CV-812),
filed on February 5, 2004. This claim alleges: common law breach of
fiduciary duty; breach of contract; and tortious interference with
contract. The plaintiffs in this case are seeking: injunctive relief;
damages; disgorgement; and costs and expenses, including counsel fees
and expert fees.
HENRY KRAMER, Derivatively On Behalf of INVESCO ENERGY FUND, INVESCO
STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO
FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., Defendants, AND
INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL
FUNDS, Nominal Defendants, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0397), filed on March 4,
2004. This claim alleges violations of Section 36(b) of the Investment
Company Act and common law breach of fiduciary duty. The plaintiff in
this case is seeking damages and costs and expenses, including counsel
fees and expert fees.
CYNTHIA L. ESSENMACHER, Derivatively On Behalf of the INVESCO DYNAMICS
FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC.,
AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO
DYNAMICS FUND AND THE "INVESCO FUNDS", Nominal Defendants, in the
United States District Court, District of Delaware (Civil Action No.
04-CV-188), filed on March 29, 2004. This claim alleges: violations of
Section 36(b) of the Investment Company Act; violations of Section 206
of the Advisers Act; common law breach of fiduciary duty; and civil
conspiracy. The plaintiff in this case is seeking: damages; injunctive
relief; and costs and expenses, including counsel fees and expert fees.
APPENDIX N-2
PENDING LITIGATION ALLEGING EXCESSIVE INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON
SMITH, INDIVIDUALLY AND ON BEHALF OF All Others Similarly Situated, v.
T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL,
INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM
INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial
Circuit Court for Madison County, Illinois (Case No. 2003-L-001253),
filed on September 23, 2003. This claim alleges: common law breach of
duty and common law negligence and gross negligence. The plaintiffs in
this case are seeking: compensatory and punitive damages; interest; and
attorneys' fees and costs.
JOHN BILSKI, Individually And On Behalf Of All Others Similarly
Situated, v. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO
INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE
INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the
United States District Court, Southern District of Illinois (East St.
Louis) (Case No. 03-772), filed on November 19, 2003. This claim
alleges: violations of Sections 36(a) and 36(b) of the Investment
Company Act of 1940; common law breach of duty; and common law
negligence and gross negligence. The plaintiff in this case is seeking:
compensatory and punitive damages; interest; and attorneys' fees and
costs.
APPENDIX N-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND DISTRIBUTION FEES
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, IINA, AIM Distributors and/or INVESCO Distributors and allege that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and, in some cases, also allege that the defendants adopted unlawful distribution plans. These lawsuits either have been served or have had service of process waived as of July 14, 2004. All of these lawsuits have been transferred to the United States District Court for the Southern District of Texas, Houston Division by order of the applicable United States District Court in which they were initially filed. The plaintiff in one of these lawsuits (Ronald Kondracki v. AIM Advisors, Inc. and AIM Distributor, Inc.) has challenged this order.
RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in
the United States District Court for the Southern District of Illinois
(Civil Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim
alleges violations of Section 36(b) of the Investment Company Act of
1940 (the "Investment Company Act"). The plaintiff in this case is
seeking: damages; injunctive relief; prospective relief in the form of
reduced fees; rescission of the investment advisory agreements and
distribution plans; and costs and expenses, including counsel fees.
DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA
LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.),
INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-978-T24-TBM),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS,
COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY
BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-977-T17-MSS),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
APPENDIX N-4
PENDING LITIGATION ALLEGING IMPROPER DISTRIBUTION FEES
CHARGED TO CLOSED FUNDS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM and/or AIM Distributors and allege that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
LAWRENCE ZUCKER, On Behalf Of AIM SMALL CAP GROWTH FUND AND AIM LIMITED
MATURITY TREASURY FUND, V. A I M ADVISORS, INC., in the United States
District Court, Southern District of Texas, Houston Division (Civil
Action No. H-03-5653), filed on December 10, 2003. This claim alleges
violations of Section 36(b) of the Investment Company Act of 1940 (the
"Investment Company Act") and common law breach of fiduciary duty. The
plaintiff in this case is seeking: damages; injunctive relief; and
costs and expenses, including counsel fees.
STANLEY LIEBER, ON BEHALF OF INVESCO BALANCED FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO EUROPEAN
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO GROWTH & INCOME FUND, INVESCO GROWTH FUND, INVESCO HEALTH
SCIENCE FUND, INVESCO HIGH YIELD FUND, INVECO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO LEISURE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SELECT INCOME FUND, INVESCO TAX
FREE BOND FUND, INVESCO TECHNOLOGY FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO TOTAL RETURN FUND, INVESCO US GOVERNMENT SECURITIES FUND,
INVESCO UTILITIES FUND, INVESCO VALUE EQUITY FUND, V. INVESCO FUNDS
GROUP, INC. AND A I M ADVISORS, INC., in the United States District
Court, Southern District of Texas, Houston Division (Civil Action No.
H-03-5744), filed on December 17, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act and common law breach of
fiduciary duty. The plaintiff in this case is seeking: damages;
injunctive relief; and costs and expenses, including counsel fees.
HERMAN C. RAGAN, Derivatively, And On Behalf Of Himself And All Others
Similarly Situated, v. INVESCO FUNDS GROUP, INC., AND A I M
DISTRIBUTORS, INC., in the United States District Court for the
Southern District of Georgia, Dublin Division (Civil Action No.
CV304-031), filed on May 6, 2004. This claim alleges violations of:
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 thereunder; Sections 17(a)(2) and 17(a)(3) of the
Securities Act of 1933; and Section 36(b) of the Investment Company
Act. This claim also alleges controlling person liability, within the
meaning of Section 20 of the Exchange Act against AIM Distributors. The
plaintiff in this case is seeking: damages and costs and expenses,
including counsel fees.
APPENDIX N-5
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
AND DIRECTED-BROKERAGE ARRANGEMENTS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM and INVESCO Funds and allege that the defendants improperly used the assets of the AIM and INVESCO Funds to pay brokers to aggressively push the AIM and INVESCO Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
JOY D. BEASLEY AND SHEILA McDAID, Individually and On Behalf of All
Others Similarly Situated, v. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT
H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT,
ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING,
PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S.
SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND,
AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED
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 DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND
FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN
SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL
FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH
FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM
LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE
FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II
FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
NOMINAL DEFENDANTS, in the United States District Court for the
District of Colorado (Civil Action No. 04-B-0958), filed on May 10,
2004. The plaintiffs voluntarily dismissed this case in Colorado and
re-filed it on July 2, 2004 in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action H-04-2589).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act of 1940 (the "Investment Company Act") and
violations of Sections 206 and 215 of the Investment Advisers Act of
1940 (the "Advisers Act"). The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are
seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees.
RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT
R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
AND JOHN DOES 1-100, Defendants, AND AIM AGGRESSIVE GROWTH FUND, AIM
ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED 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 DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM
EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL
COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH
CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM
LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND,
AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM
MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND,
AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY
FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND,
AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO
ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO
DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND,
INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND,
INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND,
INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS,
in the United States District Court for the District of Colorado (Civil
Action No. 04-N-0989), filed on May 13, 2004. The plaintiff voluntarily
dismissed this case in Colorado and re-filed it on July 1, 2004 in the
United States District Court for the Southern District of Texas,
Houston Division (Civil Action H-04-2587). This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment Company
Act and violations of Sections 206 and 215 of the Advisers Act. The
claim also alleges common law breach of fiduciary duty. The plaintiff
in this case is seeking: compensatory and punitive damages; rescission
of certain Funds' advisory agreements and distribution plans and
recovery of all fees paid; an accounting of all fund-related fees,
commissions and soft dollar payments; restitution of all unlawfully or
discriminatorily obtained fees and charges; and attorneys' and experts'
fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X, unaudited financial statements for the period ended April 30, 2004, for Registrant's portfolios have been included in addition to the portfolios' audited financial statements for the period ended October 31, 2003. Such financial statements reflect all adjustments which are of a normal recurring nature and which are, in the opinion of management, necessary to a fair statement of the results for the periods presented.
FS
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of AIM Developing Markets 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 Developing Markets Fund (one of the funds constituting AIM Investment Funds; hereafter referred to as the "Fund") at October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for 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 October 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2003
Houston, Texas
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-94.77%
ARGENTINA-0.00%
Banco Hipotecario S.A.-Wts., expiring
02/02/04 (Diversified Banks) (Acquired
01/28/99; Cost $30,850)(a)(b)(c)(d) 617 $ 0
========================================================================
BRAZIL-6.13%
Brasil Telecom Participacoes S.A.-Pfd.
(Integrated Telecommunication Services) 238,771,000 1,745,073
------------------------------------------------------------------------
Companhia de Bebidas das Americas-ADR
(Brewers) 81,000 1,717,200
------------------------------------------------------------------------
Companhia Siderurgica Nacional S.A. (Steel) 45,276,000 1,863,479
------------------------------------------------------------------------
Petroleo Brasileiro S.A.-ADR (Integrated Oil
& Gas) 147,600 3,211,776
------------------------------------------------------------------------
Tele Centro Oeste Celular Participacoes
S.A.-ADR (Wireless Telecommunication
Services) 143,400 1,247,580
------------------------------------------------------------------------
Tele Norte Leste Participacoes S.A.-ADR
(Integrated Telecommunication Services) 169,334 2,399,463
------------------------------------------------------------------------
Telesp Celular Participacoes S.A.-Pfd.
(Wireless Telecommunication Services) 1,000 2
------------------------------------------------------------------------
Uniao de Bancos Brasileiros S.A.-ADR
(Diversified Banks) 124,216 2,746,416
========================================================================
14,930,989
========================================================================
CAYMAN ISLANDS-1.26%
Global Bio-chem Technology Group Co. Ltd.
(Biotechnology) 4,468,000 2,272,664
------------------------------------------------------------------------
Xinao Gas Holdings Ltd. (Gas Utilities)(e) 1,500,000 806,441
========================================================================
3,079,105
========================================================================
CHINA-3.90%
Anhui Conch Cement Co. Ltd.-Class H
(Construction Materials) 746,000 850,173
------------------------------------------------------------------------
China Petroleum and Chemical Corp. (Sinopec)-
Class H (Integrated Oil & Gas) 7,366,000 2,442,496
------------------------------------------------------------------------
China Shipping Development Co. Ltd.-Class H
(Marine) 1,418,000 931,261
------------------------------------------------------------------------
Lianhua Supermarket Holdings Ltd.-Class H
(Food Retail)(e) 1,045,000 1,022,716
------------------------------------------------------------------------
Tong Ren Tang Technologies Co. Ltd.
(Pharmaceuticals) 531,000 1,018,840
------------------------------------------------------------------------
Travelsky Technology Ltd.-Class H (Data
Processing & Outsourced Services) 914,000 859,200
------------------------------------------------------------------------
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
CHINA-(CONTINUED)
Weiqiao Textile Co. Ltd.-Class H (Textiles)
(Acquired 09/19/03-10/02/03; Cost
$2,437,383)(a)(e) 2,020,200 $ 2,367,341
========================================================================
9,492,027
========================================================================
CZECH REPUBLIC-0.71%
Komercni Banka A.S.-GDR (Diversified Banks) 57,700 1,722,345
========================================================================
EGYPT-0.63%
Orascom Construction Industries (Construction
& Engineering) 139,106 1,545,622
========================================================================
GREECE-0.44%
Coca-Cola Hellenic Bottling Co. S.A. (Soft
Drinks) 55,000 1,061,488
========================================================================
HONG KONG-4.52%
Cathay Pacific Airways Ltd. (Airlines) 930,000 1,778,420
------------------------------------------------------------------------
China Merchants Holdings International Co.
Ltd. (Industrial Conglomerates) 1,844,000 2,493,304
------------------------------------------------------------------------
CNOOC Ltd. (Oil & Gas Exploration &
Production) 796,000 1,501,674
------------------------------------------------------------------------
COFCO International Ltd. (Packaged Foods &
Meats) 3,356,000 2,074,379
------------------------------------------------------------------------
Denway Motors Ltd. (Automobile Manufacturers) 1,570,000 1,293,912
------------------------------------------------------------------------
Lee & Man Paper Manufacturing Ltd. (Metal &
Glass Containers) (Acquired
09/22/03-09/26/03; Cost $1,383,654)(a)(e) 2,528,500 1,872,215
========================================================================
11,013,904
========================================================================
HUNGARY-3.10%
Gedeon Richter Rt. (Pharmaceuticals) 24,400 2,495,886
------------------------------------------------------------------------
Magyar Tavkozlesi Rt (Integrated
Telecommunication Services) 269,600 965,212
------------------------------------------------------------------------
OTP Bank Rt. (Diversified Banks) 146,500 1,785,235
------------------------------------------------------------------------
OTP Bank Rt.-GDR REGS (Diversified Banks)(e) 94,300 2,316,253
------------------------------------------------------------------------
Technoimpex (Multi-Sector Holdings) (Acquired
11/22/90; Cost $2,989,406)(a)(b)(c)(e) 1,400 0
========================================================================
7,562,586
========================================================================
INDIA-5.34%
Dr. Reddy's Laboratories Ltd.-ADR
(Pharmaceuticals) 37,400 997,084
------------------------------------------------------------------------
HDFC Bank Ltd.-ADR (Diversified Banks) 81,761 2,116,792
------------------------------------------------------------------------
Infosys Technologies Ltd.-ADR (IT Consulting
& Services) 47,500 4,018,975
------------------------------------------------------------------------
Ranbaxy Laboratories Ltd.-GDR
(Pharmaceuticals) (Acquired 10/22/03; Cost
$1,258,200)(a)(b)(c) 54,000 1,239,300
------------------------------------------------------------------------
|
FS-2
MARKET
SHARES VALUE
------------------------------------------------------------------------
INDIA-(CONTINUED)
Ranbaxy Laboratories Ltd.-GDR
(Pharmaceuticals) 48,000 $ 1,101,600
------------------------------------------------------------------------
Tata Motors Ltd.-GDR (Automobile
Manufacturers) (Acquired 10/22/03; Cost
$662,580)(a)(b)(c) 81,000 680,400
------------------------------------------------------------------------
Tata Motors Ltd.-GDR (Automobile
Manufacturers) 339,000 2,847,600
========================================================================
13,001,751
========================================================================
INDONESIA-1.47%
PT Astra Agro Lestari TBK (Agricultural
Products) 4,632,500 940,512
------------------------------------------------------------------------
PT Telekomunikasi Indonesia (Integrated
Telecommunication Services) 3,734,500 2,637,204
========================================================================
3,577,716
========================================================================
ISRAEL-2.82%
NICE Systems Ltd.-ADR (Communications
Equipment)(e) 59,100 1,329,750
------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd.
(Pharmaceuticals)(e) 18,500 1,188,625
------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 76,600 4,357,774
========================================================================
6,876,149
========================================================================
LUXEMBOURG-0.64%
Tenaris S.A. (Oil & Gas Equipment & Services) 5 13
------------------------------------------------------------------------
Tenaris S.A.-ADR (Oil & Gas Equipment &
Services) 57,368 1,560,410
========================================================================
1,560,423
========================================================================
MALAYSIA-2.79%
Genting Berhad (Casinos & Gaming) 944,000 4,595,790
------------------------------------------------------------------------
IOI Corp. Berhad (Agricultural Products) 1,098,000 2,196,000
========================================================================
6,791,790
========================================================================
MEXICO-5.32%
Alfa, S.A.-Class A (Industrial Conglomerates) 802,000 2,288,933
------------------------------------------------------------------------
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 155,800 3,708,040
------------------------------------------------------------------------
Cemex S.A. de CV-Wts., expiring 12/21/04
(Construction Materials) (Acquired
12/16/99; Cost $7,704)(a)(b)(d) 22,000 10,182
------------------------------------------------------------------------
Consorcio ARA, S.A. de C.V. (Homebuilding)(e) 473,300 1,294,547
------------------------------------------------------------------------
Grupo Financiero BanCrecer S.A. de
C.V.-Series B (Other Diversified Financial
Services)(e) 1 0
------------------------------------------------------------------------
Grupo Financiero Banorte S.A. de C.V.-Class O
(Diversified Banks) 492,000 1,607,332
------------------------------------------------------------------------
Grupo Financiero BBVA Bancomer, S.A. de C.V.-
Class B (Diversified Banks)(e) 1,784,290 1,520,440
------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 31,628 1,225,585
------------------------------------------------------------------------
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
MEXICO-(CONTINUED)
Wal-Mart de Mexico S.A. de C.V.-Series C
(Hypermarkets & Super Centers) 500,000 $ 1,306,774
========================================================================
12,961,833
========================================================================
PHILIPPINES-1.41%
Philippine Long Distance Telephone Co.
(Integrated Telecommunication Services)(e) 174,000 2,402,708
------------------------------------------------------------------------
SM Prime Holdings (Real Estate Management &
Development) 7,974,000 1,036,332
========================================================================
3,439,040
========================================================================
RUSSIA-6.40%
AO VimpelCom-ADR (Wireless Telecommunication
Services)(e) 44,400 2,890,440
------------------------------------------------------------------------
LUKOIL-ADR (Integrated Oil & Gas) 66,058 5,337,486
------------------------------------------------------------------------
Mobile Telesystems-ADR (Wireless
Telecommunication Services) 71,700 5,556,033
------------------------------------------------------------------------
YUKOS-ADR (Integrated Oil & Gas) 39,936 1,805,107
========================================================================
15,589,066
========================================================================
SOUTH AFRICA-3.79%
Barloworld Ltd. (Industrial Conglomerates) 121,900 1,058,215
------------------------------------------------------------------------
Foschini Ltd. (Apparel Retail) 430,400 1,102,773
------------------------------------------------------------------------
Gold Fields Ltd. (Gold) 115,700 1,654,561
------------------------------------------------------------------------
Impala Platinum Holdings Ltd. (Precious
Metals & Minerals) 23,201 2,133,646
------------------------------------------------------------------------
Standard Bank Group Ltd. (Diversified Banks) 677,900 3,287,844
========================================================================
9,237,039
========================================================================
SOUTH KOREA-18.51%
Cheil Communications Inc. (Advertising) 11,500 1,408,957
------------------------------------------------------------------------
CJ Corp. (Packaged Foods & Meats) 50,600 2,526,793
------------------------------------------------------------------------
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. (Construction & Farm Machinery & Heavy
Trucks)(e) 257,100 3,454,068
------------------------------------------------------------------------
Hana Bank (Diversified Banks) 344,400 5,994,626
------------------------------------------------------------------------
Hankook Tire Co. Ltd. (Tires & Rubber) 452,400 3,123,032
------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.
(Department Stores) 103,000 2,606,548
------------------------------------------------------------------------
Hyundai Motor Co., Ltd. (Automobile
Manufacturers) 32,000 1,066,667
------------------------------------------------------------------------
Kook Soon Dang Brewery Co., Ltd. (Packaged
Foods & Meats) 106,492 1,979,572
------------------------------------------------------------------------
Kookmin Bank-ADR (Diversified Banks) 115,583 4,247,675
------------------------------------------------------------------------
LG Chem Ltd. (Commodity Chemicals) 21,800 874,947
------------------------------------------------------------------------
POSCO-ADR (Steel) 113,200 3,280,536
------------------------------------------------------------------------
|
FS-3
MARKET
SHARES VALUE
------------------------------------------------------------------------
SOUTH KOREA-(CONTINUED)
Samsung Electronics Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 07/25/01-07/26/01; Cost
$715,479)(a)(b) 24,200 $ 2,400,640
------------------------------------------------------------------------
Samsung Electronics Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 11/03/00-08/29/01; Cost
$2,632,053)(a)(b) 32,023 6,404,600
------------------------------------------------------------------------
Samsung Electronics Co., Ltd.-Pfd.
(Electronic Equipment Manufacturers) 11,300 2,243,769
------------------------------------------------------------------------
Shinsegae Co., Ltd. (Department Stores) 7,800 1,565,273
------------------------------------------------------------------------
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services) 98,492 1,930,443
========================================================================
45,108,146
========================================================================
TAIWAN-17.88%
Ambit Microsystems Corp. (Computer Storage &
Peripherals) 513,000 1,406,101
------------------------------------------------------------------------
Asia Optical Co., Inc. (Photographic
Products) 533,000 3,518,774
------------------------------------------------------------------------
AU Optronics Corp.-ADR (Electronic Equipment
Manufacturers) 184,000 2,498,720
------------------------------------------------------------------------
Chinatrust Financial Holding Co. Ltd.
(Diversified Banks) 2,673,000 2,780,928
------------------------------------------------------------------------
Compal Electronics Inc. (Computer Hardware) 702,600 1,066,428
------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronic Equipment Manufacturers) 170,400 763,360
------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 08/14/02-03/10/03; Cost
$2,215,134)(a)(b) 246,126 2,215,134
------------------------------------------------------------------------
Ichia Technologies, Inc. (Computer Storage &
Peripherals)(e) 904,000 1,651,872
------------------------------------------------------------------------
Largan Precision Co., Ltd. (Photographic
Products) 95,000 1,016,357
------------------------------------------------------------------------
MediaTek Inc. (Semiconductors) 112,000 1,155,320
------------------------------------------------------------------------
MediaTek Inc.-Equity Participation Ctfs.,
expiring 01/17/06 (Salomon Smith Barney
Holdings Inc.) (Semiconductors) (Acquired
03/10/03; Cost $718,332)(a)(e) 125,636 1,295,935
------------------------------------------------------------------------
Merry Electronics Co., Ltd. (Electronic
Equipment Manufacturers) 556,000 901,267
------------------------------------------------------------------------
Novatek Microelectronics Corp., Ltd.
(Semiconductors) 605,650 1,909,948
------------------------------------------------------------------------
Oriental Union Chemical Corp. (Commodity
Chemicals) 2,008,000 2,603,949
------------------------------------------------------------------------
Quanta Computer Inc. (Computer Hardware) 266,000 725,169
------------------------------------------------------------------------
Quanta Computer Inc.-Equity Participation
Ctfs., expiring 01/08/04 (UBS A.G.)
(Computer Hardware) (Acquired
01/02/03-03/10/03; Cost $2,440,254)(a) 1,437,590 3,903,057
------------------------------------------------------------------------
|
------------------------------------------------------------------------
MARKET
SHARES VALUE
TAIWAN-(CONTINUED)
Taiwan Semiconductor Manufacturing Co. Ltd.-
Equity Participation Ctfs., expiring
01/14/05 (ABN AMRO) (Semiconductors)
(Acquired 01/02/03-03/10/03; Cost
$6,485,393)(a)(e) 5,437,862 $ 10,722,104
------------------------------------------------------------------------
Wan Hai Lines Ltd. (Marine) 2,380,000 2,328,795
------------------------------------------------------------------------
Yang Ming Marine Transport (Marine) 1,112,000 1,114,294
========================================================================
43,577,512
========================================================================
THAILAND-3.32%
Bangkok Bank PCL-NVDR (Diversified
Banks)(c)(e) 1,239,000 2,667,184
------------------------------------------------------------------------
Kasikornbank PCL (Diversified Banks)(e) 1,286,000 1,432,466
------------------------------------------------------------------------
Land & Houses PCL (Homebuilding) 3,708,000 1,253,016
------------------------------------------------------------------------
Siam Cement PCL (The) (Construction
Materials) 272,000 1,538,723
------------------------------------------------------------------------
Siam Commercial Bank PCL (Diversified
Banks)(e) 1,172,000 1,210,138
========================================================================
8,101,527
========================================================================
TURKEY-1.39%
Haci Omer Sabanci Holding A.S. (Multi-Sector
Holdings) 481,759,257 2,012,741
------------------------------------------------------------------------
Koc Holding A.S. (Multi-Sector Holdings)(e) 99,958,800 1,380,832
========================================================================
3,393,573
========================================================================
UNITED KINGDOM-3.00%
Anglo American PLC (Diversified Metals &
Mining) 359,300 7,320,465
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $165,128,894) 230,944,096
========================================================================
PRINCIPAL
AMOUNT
BONDS-0.00%
BRAZIL-0.00%
Companhia Vale Do Rio Doce, Non Conv. Bond
(Diversified Metals & Mining) 0.00%,
12/31/09 (Acquired 01/22/99; Cost
$0)(a)(b)(c)(f)(g) BRL 276 0
========================================================================
SHARES
MONEY MARKET FUNDS-1.85%
STIC Liquid Assets Portfolio(h) 2,260,107 2,260,107
------------------------------------------------------------------------
STIC Prime Portfolio(h) 2,260,107 2,260,107
========================================================================
Total Money Market Funds (Cost
$4,520,214) 4,520,214
========================================================================
TOTAL INVESTMENTS-96.62% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $169,649,108) 235,464,310
========================================================================
|
FS-4
MARKET
SHARES VALUE
------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-5.48%
STIC Liquid Assets Portfolio(h)(i) 6,672,818 $ 6,672,818
------------------------------------------------------------------------
STIC Prime Portfolio(h)(i) 6,672,817 6,672,817
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $13,345,635) 13,345,635
========================================================================
TOTAL INVESTMENTS-102.10% (Cost $182,994,743) 248,809,945
========================================================================
OTHER ASSETS LESS LIABILITIES-(2.10%) (5,116,867)
========================================================================
NET ASSETS-100.00% $243,693,078
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt BRL - Brazilian Dollar Conv. - Convertible Ctfs. - Certificates GDR - Global Depositary Receipt NVDR - Non-voting Depository Receipt Pfd. - Preferred REGS - Regulation S Wts. - Warrants |
Notes to Schedule of Investments:
(a) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 10/31/03 was $33,110,908,
which represented 13.59% of the Fund's net assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(b) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at 10/31/03 was $12,950,256 which represented
5.31% of the Fund's net assets.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees.
(d) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(e) Non-income producing security.
(f) Foreign denominated security. Par value is denominated in currency
indicated.
(g) Zero coupon bond issued at a discount and acquired through a corporate
action.
(h) The money market fund and the Fund are affiliated by having the same
investment advisor.
(i) 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-5
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$165,128,894)* $ 230,944,096
----------------------------------------------------------
Investments in affiliated money market
funds (cost $17,865,849) 17,865,849
----------------------------------------------------------
Foreign currencies, at value (cost
$9,188,106) 9,200,549
----------------------------------------------------------
Receivables for:
Investments sold 1,752,363
----------------------------------------------------------
Fund shares sold 245,213
----------------------------------------------------------
Dividends 510,015
----------------------------------------------------------
Amount due from advisor 2,756
----------------------------------------------------------
Investment for deferred compensation plan 7,242
----------------------------------------------------------
Other assets 24,243
==========================================================
Total assets 260,552,326
__________________________________________________________
==========================================================
LIABILITIES:
Payables for:
Investments purchased 858,860
----------------------------------------------------------
Fund shares reacquired 1,809,655
----------------------------------------------------------
Deferred compensation plan 7,242
----------------------------------------------------------
Collateral upon return of securities
loaned 13,345,635
----------------------------------------------------------
Accrued distribution fees 159,172
----------------------------------------------------------
Accrued trustees' fees 3,836
----------------------------------------------------------
Accrued transfer agent fees 125,099
----------------------------------------------------------
Accrued operating expenses 549,748
==========================================================
Total liabilities 16,859,248
==========================================================
Net assets applicable to shares outstanding $ 243,693,078
__________________________________________________________
==========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 441,173,374
----------------------------------------------------------
Undistributed net investment income 375,049
----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (263,656,393)
----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 65,801,048
==========================================================
$ 243,693,078
__________________________________________________________
==========================================================
NET ASSETS:
Class A $ 209,220,849
__________________________________________________________
==========================================================
Class B $ 30,111,054
__________________________________________________________
==========================================================
Class C $ 4,361,175
__________________________________________________________
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE, UNLIMITED
NUMBER OF SHARES AUTHORIZED:
Class A 19,891,151
__________________________________________________________
==========================================================
Class B 2,906,739
__________________________________________________________
==========================================================
Class C 421,584
__________________________________________________________
==========================================================
Class A:
Net asset value per share $ 10.52
----------------------------------------------------------
Offering price per share:
(Net asset value of $10.52 divided
by 95.25%) $ 11.04
__________________________________________________________
==========================================================
Class B:
Net asset value and offering price per
share $ 10.36
__________________________________________________________
==========================================================
Class C:
Net asset value and offering price per
share $ 10.34
__________________________________________________________
==========================================================
|
* At October 31, 2003, securities with an aggregate market value of $12,879,313 were on loan to brokers.
See Notes to Financial Statements.
FS-6
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $444,317) $ 4,013,000
-------------------------------------------------------------------------
Dividends from affiliated money market funds 47,762
-------------------------------------------------------------------------
Interest 249,908
-------------------------------------------------------------------------
Securities lending 85,752
=========================================================================
Total investment income 4,396,422
=========================================================================
EXPENSES:
Advisory fees 1,755,280
-------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------
Custodian fees 136,448
-------------------------------------------------------------------------
Distribution fees:
Class A 713,072
-------------------------------------------------------------------------
Class B 279,469
-------------------------------------------------------------------------
Class C 34,355
-------------------------------------------------------------------------
Transfer agent fees 1,138,890
-------------------------------------------------------------------------
Trustees' fees 11,955
-------------------------------------------------------------------------
Other 247,553
=========================================================================
Total expenses 4,367,022
=========================================================================
Less: Fees waived and expense offset arrangements (602,551)
=========================================================================
Net expenses 3,764,471
=========================================================================
Net investment income 631,951
=========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (net of tax on sale of foreign
investments of $267,771 -- Note 1E) 5,641,624
-------------------------------------------------------------------------
Foreign currencies 15,008
=========================================================================
5,656,632
=========================================================================
Change in net unrealized appreciation of:
Investment securities (net of change in estimated tax on
foreign investments held of $271,285 -- Note 1E) 73,570,129
-------------------------------------------------------------------------
Foreign currencies 1,822
=========================================================================
73,571,951
=========================================================================
Net gain from investment securities and foreign currencies 79,228,583
=========================================================================
Net increase in net assets resulting from operations $79,860,534
_________________________________________________________________________
=========================================================================
|
See Notes to Financial Statements.
FS-7
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 631,951 $ (433,539)
------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 5,656,632 (3,181,583)
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 73,571,951 24,983,345
==========================================================================================
Net increase in net assets resulting from operations 79,860,534 21,368,223
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (1,561,040)
------------------------------------------------------------------------------------------
Class B -- (329,075)
------------------------------------------------------------------------------------------
Class C -- (12,188)
==========================================================================================
Decrease in net assets resulting from distributions -- (1,902,303)
==========================================================================================
Share transactions-net:
Class A 18,123,053 2,526,300
------------------------------------------------------------------------------------------
Class B (12,324,655) (28,318,242)
------------------------------------------------------------------------------------------
Class C 200,503 681,781
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions 5,998,901 (25,110,161)
==========================================================================================
Net increase (decrease) in net assets 85,859,435 (5,644,241)
==========================================================================================
NET ASSETS:
Beginning of year 157,833,643 163,477,884
==========================================================================================
End of year (including undistributed net investment income
(loss) of $375,049 and $(4,138) for 2003 and 2002,
respectively) $243,693,078 $157,833,643
__________________________________________________________________________________________
==========================================================================================
|
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Developing Markets Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 primary investment objective is long-term growth of capital and its secondary objective is income. Companies are listed in the Schedule of Investments based on the country in which they are organized.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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.
FS-8
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. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. 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 ordinarily 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 Subchapter M 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. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator. For the period November 1, 2002 through May 23, 2003, INVESCO Asset Management Limited was the Fund's sub-advisor and sub-administrator. The Fund pays AIM investment management and administration fees at an annual rate of 0.975% on the first $500 million of the Fund's average daily net assets, plus 0.95% on the next $500 million of the Fund's average daily net assets, plus 0.925% on the next $500 million of the Fund's average daily net assets, plus 0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has contractually agreed to waive fees and/or reimburse expenses (excluding Rule 12b-1 fees, interest, taxes, fund merger and reorganization expenses,
FS-9
extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit total annual fund operating expenses of Class A shares to 2.00%. 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 (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $598,343.
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 October 31, 2003, AIM was paid $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $641,676 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 and Class C 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, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. 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. Rule 12b-1 Plan fees on Class A shares issued as a result of conversion of shares from G.T. Developing Markets Fund, Inc. on October 31, 1997 and in connection with the AIM Eastern Europe Fund reorganization on September 10, 1999 are limited to 0.25% of the average net assets of the Fund's Class A shares issued in connection with such transactions. Pursuant to the Plans, for the year ended October 31, 2003, the Class A, Class B and Class C shares paid $713,072, $279,469 and $34,355 respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $12,641 in front-end sales commissions from the sale of Class A shares and $16,501 $266, and $3,593 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemption by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $3,753 and reductions in custodian fees of $455 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $4,208.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $2,398 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could 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 were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
FS-10
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
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 of the loaned securities determined daily. 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, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $12,879,313 were on loan to brokers. The loans were secured by cash collateral of $13,345,635 received by the Fund and subsequently invested in an affiliated money market fund. For the year ended October 31, 2003, the Fund received fees of $85,752 for securities lending.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the years ended October 31, 2003 and 2002 was as follows:
2003 2002
-----------------------------------------------------------
Distributions paid from ordinary income $-- $1,902,303
___________________________________________________________
===========================================================
|
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Undistributed ordinary income $ 385,384 ------------------------------------------------------------ Unrealized appreciation -- investments 64,960,410 ------------------------------------------------------------ Temporary book/tax differences (10,334) ------------------------------------------------------------ Capital loss carryforward (262,815,756) ------------------------------------------------------------ Shares of beneficial interest 441,173,374 ============================================================ Total net assets $ 243,693,078 ____________________________________________________________ ============================================================ |
The difference between book-basis and tax-basis unrealized appreciation 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 difference is attributable primarily to the tax deferral of losses on wash sales. Amount includes appreciation (depreciation) on foreign currencies of $(14,154).
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 the deferral of trustee compensation and trustee retirement plan expenses.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
----------------------------------------------
October 31, 2005 $ 95,190,215
----------------------------------------------
October 31, 2006 76,692,697
----------------------------------------------
October 31, 2007 9,273,499
----------------------------------------------
October 31, 2008 15,085,807
----------------------------------------------
October 31, 2009 59,191,538
----------------------------------------------
October 31, 2010 7,382,000
==============================================
Total capital loss carryforward $262,815,756
______________________________________________
==============================================
|
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $171,081,726 and $172,940,156, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $68,939,251
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,964,687)
===========================================================
Net unrealized appreciation of investment
securities $64,974,564
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $183,835,381.
|
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions, foreign capital gain tax and capital loss carryforwards on October 31, 2003, undistributed net investment income was decreased by $252,764, undistributed net realized gains decreased by $2,745,537 and shares of beneficial interest increased by $2,998,301. This reclassification had no effect on the net assets of the Fund.
FS-11
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
-------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------
2003 2002
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 21,378,062 $ 175,888,823 16,547,680 $ 131,599,244
-------------------------------------------------------------------------------------------------------------------------
Class B 687,629 5,832,379 1,757,089 14,693,888
-------------------------------------------------------------------------------------------------------------------------
Class C 3,620,023 28,027,976 4,399,753 35,723,849
=========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 154,286 1,189,539
-------------------------------------------------------------------------------------------------------------------------
Class B -- -- 36,032 276,365
-------------------------------------------------------------------------------------------------------------------------
Class C -- -- 1,387 10,628
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,240,782 9,667,175 2,436,361 20,184,741
-------------------------------------------------------------------------------------------------------------------------
Class B (1,256,198) (9,667,175) (2,460,236) (20,184,741)
=========================================================================================================================
Reacquired:
Class A (20,514,740) (167,432,945) (18,869,366) (150,447,224)
-------------------------------------------------------------------------------------------------------------------------
Class B (1,090,836) (8,489,859) (2,926,977) (23,103,754)
-------------------------------------------------------------------------------------------------------------------------
Class C (3,569,799) (27,827,473) (4,299,081) (35,052,696)
=========================================================================================================================
494,923 $ 5,998,901 (3,223,072) $ (25,110,161)
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
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 OCTOBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.96 $ 6.32 $ 8.89 $ 9.86 $ 7.53
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) (0.01)(a) 0.15(a) 0.01(a) 0.06(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.52 0.74 (2.67) (0.95) 2.36
=========================================================================================================================
Total from investment operations 3.56 0.73 (2.52) (0.94) 2.42
=========================================================================================================================
Redemptions fees retained -- -- -- 0.01 0.03
=========================================================================================================================
Less dividends from net investment income -- (0.09) (0.05) (0.04) (0.12)
=========================================================================================================================
Net asset value, end of period $ 10.52 $ 6.96 $ 6.32 $ 8.89 $ 9.86
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 51.15% 11.37% (28.51)% (9.52)% 33.11%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $209,221 $123,812 $110,756 $136,160 $157,198
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 1.84% 1.76% 1.87% 1.91%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.33%(c) 2.35% 2.26% 1.95% 2.38%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.44%(c) (0.07)% 1.95% 0.05% 0.68%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 100% 109% 144% 192% 125%
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
(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 $148,646,306.
FS-12
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------
2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.89 $ 6.25 $ 8.79 $ 9.79 $ 7.49
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.05)(a) 0.11(a) (0.06)(a) 0.01(a)P
----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.48 0.73 (2.65) (0.94) 2.37
======================================================================================================================
Total from investment operations 3.47 0.68 (2.54) (1.00) 2.38
======================================================================================================================
Less dividends from net investment income -- (0.04) -- -- (0.08)
======================================================================================================================
Net asset value, end of period $ 10.36 $ 6.89 $ 6.25 $ 8.79 $ 9.79
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b) 50.36% 10.85% (28.90)% (10.21)% 32.14%
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 30,111 $31,465 $51,040 $79,754 $49,723
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.53%(c) 2.38% 2.35% 2.47% 2.51%
----------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.86%(c) 2.89% 2.85% 2.55% 2.98%
======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.08)%(c) (0.61)% 1.36% (0.56)% 0.08%
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate 100% 109% 144% 192% 125%
______________________________________________________________________________________________________________________
======================================================================================================================
|
(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 $27,946,920.
CLASS C
------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 6.88 $ 6.25 $ 8.79 $ 9.79 $ 7.47
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.05)(a) 0.10(a) (0.06)(a) --(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.47 0.72 (2.64) (0.94) 2.32
==========================================================================================================================
Total from investment operations 3.46 0.67 (2.54) (1.00) 2.32
==========================================================================================================================
Less dividends from net investment income -- (0.04) -- -- --
==========================================================================================================================
Net asset value, end of period $ 10.34 $ 6.88 $ 6.25 $ 8.79 $ 9.79
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 50.29% 10.69% (28.90)% (10.21)% 31.06%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,361 $ 2,557 $ 1,682 $ 1,618 $ 412
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.53%(c) 2.38% 2.35% 2.47% 2.51%(d)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.86%(c) 2.89% 2.85% 2.55% 2.98%(d)
==========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.08)%(c) (0.61)% 1.36% (0.56)% 0.08%(d)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(e) 100% 109% 144% 192% 125%
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with generally accepted accounting
principles in the United States of America, does not include sales
charges and is not annualized for period less than one year.
(c) Ratios are based on average daily net assets of $3,435,528.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-13
NOTE 12--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-14
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of AIM Global Health Care 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 Global Health Care Fund (one of the funds constituting AIM Investment Funds; hereafter referred to as the "Fund") at October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for 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 October 31, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2003
Houston, Texas
FS-15
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-57.37%
BIOTECHNOLOGY-10.42%
Amgen Inc.(a) 700,000 $ 43,232,000
-------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(a) 250,000 1,750,000
-------------------------------------------------------------------------
Caliper Technologies Corp.(a) 20,000 112,200
-------------------------------------------------------------------------
IDEC Pharmaceuticals Corp.(a) 500,000 17,565,000
-------------------------------------------------------------------------
InterMune Inc.(a) 20,000 400,000
-------------------------------------------------------------------------
Isis Pharmaceuticals, Inc.(a) 2,170,000 14,430,500
-------------------------------------------------------------------------
Kosan Biosciences, Inc.(a) 20,000 183,400
-------------------------------------------------------------------------
Myogen, Inc.(a) 77,200 1,235,200
-------------------------------------------------------------------------
Repligen Corp.(a) 60,000 303,600
=========================================================================
79,211,900
=========================================================================
HEALTH CARE DISTRIBUTORS-3.98%
McKesson Corp. 1,000,000 30,270,000
=========================================================================
HEALTH CARE EQUIPMENT-7.56%
ATS Medical, Inc.(a)(b) 1,610,000 6,214,600
-------------------------------------------------------------------------
Becton, Dickinson & Co. 350,000 12,796,000
-------------------------------------------------------------------------
Guidant Corp. 750,000 38,257,500
-------------------------------------------------------------------------
MedSource Technologies, Inc.(a) 35,000 178,150
=========================================================================
57,446,250
=========================================================================
HEALTH CARE FACILITIES-3.63%
Community Health Systems Inc.(a) 590,000 14,171,800
-------------------------------------------------------------------------
HCA Inc. 350,000 13,387,500
=========================================================================
27,559,300
=========================================================================
HEALTH CARE SERVICES-0.68%
HMS Holdings Corp.(a)(b) 1,750,000 5,127,500
=========================================================================
MANAGED HEALTH CARE-8.29%
PacifiCare Health Systems, Inc.(a) 730,000 43,435,000
-------------------------------------------------------------------------
UnitedHealth Group Inc. 383,600 19,517,568
=========================================================================
62,952,568
=========================================================================
PHARMACEUTICALS-22.81%
Abbott Laboratories 400,000 17,048,000
-------------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------------
PHARMACEUTICALS-(CONTINUED)
Bristol-Myers Squibb Co. 900,000 $ 22,833,000
-------------------------------------------------------------------------
Pfizer Inc. 3,176,200 100,367,920
-------------------------------------------------------------------------
Wyeth 750,000 33,105,000
=========================================================================
173,353,920
=========================================================================
Total Domestic Common Stocks (Cost
$396,603,248) 435,921,438
=========================================================================
FOREIGN STOCKS-32.06%
DENMARK-0.09%
Novo Nordisk A.S.-Class B (Pharmaceuticals) 20,000 716,868
=========================================================================
FRANCE-9.81%
Aventis S.A. (Pharmaceuticals) 700,000 36,937,178
-------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 610,000 37,629,352
=========================================================================
74,566,530
=========================================================================
GERMANY-0.23%
Altana A.G. (Pharmaceuticals) 20,000 1,255,992
-------------------------------------------------------------------------
Bayer A.G. (Diversified Chemicals) 20,000 478,903
=========================================================================
1,734,895
=========================================================================
JAPAN-21.78%
Eisai Co., Ltd. (Pharmaceuticals) 1,560,000 36,629,050
-------------------------------------------------------------------------
Fujisawa Pharmaceutical Co. Ltd.
(Pharmaceuticals) (Acquired 09/07/01-
07/09/03; Cost $9,496,563)(c) 525,000 10,845,923
-------------------------------------------------------------------------
Kyorin Pharmaceutical Co., Ltd.
(Pharmaceuticals)(d) 1,966,000 29,611,667
-------------------------------------------------------------------------
Sankyo Co., Ltd. (Pharmaceuticals) 1,000,000 16,017,474
-------------------------------------------------------------------------
Takeda Chemical Industries, Ltd.
(Pharmaceuticals) 1,040,000 36,818,347
-------------------------------------------------------------------------
Yamanouchi Pharmaceutical Co., Ltd.
(Pharmaceuticals) 1,415,800 35,562,505
=========================================================================
165,484,966
=========================================================================
NETHERLANDS-0.15%
Akzo Nobel N.V. (Diversified Chemicals) 35,000 1,102,844
=========================================================================
Total Foreign Stocks (Cost $232,302,214) 243,606,103
=========================================================================
|
FS-16
MARKET
SHARES VALUE
-------------------------------------------------------------------------
MONEY MARKET FUNDS-6.72%
STIC Liquid Assets Portfolio(e) 25,532,691 $ 25,532,691
-------------------------------------------------------------------------
STIC Prime Portfolio(e) 25,532,691 25,532,691
=========================================================================
Total Money Market Funds (Cost
$51,065,382) 51,065,382
=========================================================================
TOTAL INVESTMENTS-96.15% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $679,970,844) 730,592,923
=========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-14.42%
STIC Liquid Assets Portfolio(e)(f) 54,777,891 54,777,891
-------------------------------------------------------------------------
STIC Prime Portfolio(e)(f) 54,777,890 54,777,890
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $109,555,781) 109,555,781
=========================================================================
TOTAL INVESTMENTS-110.57% (Cost $789,526,625) 840,148,704
=========================================================================
OTHER ASSETS LESS LIABILITIES-(10.57%) (80,274,888)
=========================================================================
NET ASSETS-100.00% $759,873,816
_________________________________________________________________________
=========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The Investment Company Act of 1940 defines affiliates as those companies in
which a fund holds 5% or more of the outstanding voting securities. The Fund
has not owned enough of the outstanding voting securities of the issuer to
have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value as of 10/31/03 was $11,342,100 which represented
1.49% of the Fund's net assets. The following is a summary of the
transactions with affiliates for the year ended October 31, 2003.
CHANGE IN
MARKET VALUE PURCHASES SALES AT UNREALIZED MARKET VALUE DIVIDEND REALIZED
10/31/2002 AT COST COST APPR./(DEPR.) 10/31/2003 INCOME GAIN/(LOSS)
-----------------------------------------------------------------------------------------------------------------------
ATS Medical Inc. $1,223,220 $ -- $(1,482,549) $6,473,929 $ 6,214,600 $ -- $ 517,788
Corvas International
Inc. 2,405,850 -- (5,459,185) 3,053,335 -- -- (1,482,109)
HMS Holdings Corp. 2,479,000 3,232,267 -- (583,767) 5,127,500 -- --
=======================================================================================================================
$6,108,070 $11,342,100 $ -- $ (964,321)
=======================================================================================================================
|
(c) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The market value of this security at 10/31/03 was $10,845,923, which
represented 1.43% of the Fund's net assets. Unless otherwise indicated,
these securities are not considered to be illiquid.
(d) Security considered to be illiquid. The market value of this security
represented 3.90% of the Fund's net assets.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor.
(f) 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-17
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$628,905,462)* $679,527,541
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $160,621,163) 160,621,163
-----------------------------------------------------------
Foreign currencies, at value (cost
$4,623,585) 4,584,716
-----------------------------------------------------------
Receivables for:
Investments sold 25,405,827
-----------------------------------------------------------
Fund shares sold 524,330
-----------------------------------------------------------
Dividends 1,767,590
-----------------------------------------------------------
Investment for deferred compensation plan 9,850
-----------------------------------------------------------
Other assets 36,154
===========================================================
Total assets 872,477,171
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,080,800
-----------------------------------------------------------
Fund shares reacquired 1,054,503
-----------------------------------------------------------
Deferred compensation plan 9,850
-----------------------------------------------------------
Collateral upon return of securities loaned 109,555,781
-----------------------------------------------------------
Accrued distribution fees 426,065
-----------------------------------------------------------
Accrued trustees' fees 16,052
-----------------------------------------------------------
Accrued transfer agent fees 285,834
-----------------------------------------------------------
Accrued operating expenses 174,470
===========================================================
Total liabilities 112,603,355
===========================================================
Net assets applicable to shares outstanding $759,873,816
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $711,751,254
-----------------------------------------------------------
Undistributed net investment income (loss) (21,786)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies
and option contracts (2,374,353)
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 50,518,701
===========================================================
$759,873,816
___________________________________________________________
===========================================================
NET ASSETS:
Class A $536,745,615
___________________________________________________________
===========================================================
Class B $179,645,902
___________________________________________________________
===========================================================
Class C $ 43,482,299
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 22,285,420
___________________________________________________________
===========================================================
Class B 8,131,116
___________________________________________________________
===========================================================
Class C 1,966,788
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 24.09
-----------------------------------------------------------
Offering price per share:
(Net asset value of $24.09 divided by
95.25%) $ 25.29
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 22.09
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 22.11
___________________________________________________________
===========================================================
|
* At October 31, 2003, securities with an aggregate market value of $107,245,441 were on loan to brokers.
See Notes to Financial Statements.
FS-18
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $528,165) $ 9,548,813
-------------------------------------------------------------------------
Dividends from affiliated money market funds 439,588
-------------------------------------------------------------------------
Interest 2,347
-------------------------------------------------------------------------
Securities lending 180,024
=========================================================================
Total investment income 10,170,772
=========================================================================
EXPENSES:
Advisory fees 7,101,823
-------------------------------------------------------------------------
Administrative services fees 185,138
-------------------------------------------------------------------------
Custodian fees 258,643
-------------------------------------------------------------------------
Distribution fees:
Class A 2,582,635
-------------------------------------------------------------------------
Class B 1,745,344
-------------------------------------------------------------------------
Class C 433,411
-------------------------------------------------------------------------
Transfer agent fees 2,543,343
-------------------------------------------------------------------------
Trustees' fees 22,522
-------------------------------------------------------------------------
Other 439,022
=========================================================================
Total expenses 15,311,881
=========================================================================
Less: Fees waived and expense offset arrangements (19,857)
=========================================================================
Net expenses 15,292,024
=========================================================================
Net investment income (loss) (5,121,252)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 21,456,627
-------------------------------------------------------------------------
Foreign currencies 1,049,195
-------------------------------------------------------------------------
Option contracts written 220,493
=========================================================================
22,726,315
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 33,444,312
-------------------------------------------------------------------------
Foreign currencies (77,204)
=========================================================================
33,367,108
=========================================================================
Net gain from investment securities, foreign currencies and
option contracts 56,093,423
=========================================================================
Net increase in net assets resulting from operations $50,972,171
_________________________________________________________________________
=========================================================================
|
See Notes to Financial Statements.
FS-19
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 2003 and 2002
2003 2002
-------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (5,121,252) $ (11,104,319)
-------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 22,726,315 (20,872,962)
-------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and option
contracts 33,367,108 (101,166,775)
===========================================================================================
Net increase (decrease) in net assets resulting from
operations 50,972,171 (133,144,056)
===========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (81,059,596)
-------------------------------------------------------------------------------------------
Class B -- (33,690,875)
-------------------------------------------------------------------------------------------
Class C -- (6,133,328)
===========================================================================================
Decrease in net assets resulting from distributions -- (120,883,799)
===========================================================================================
Share transactions-net:
Class A (34,088,071) 115,829,342
-------------------------------------------------------------------------------------------
Class B (18,872,586) 37,085,336
-------------------------------------------------------------------------------------------
Class C (5,906,404) 25,381,473
===========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (58,867,061) 178,296,151
===========================================================================================
Net increase (decrease) in net assets (7,894,890) (75,731,704)
===========================================================================================
NET ASSETS:
Beginning of year 767,768,706 843,500,410
===========================================================================================
End of year (including undistributed net investment income
(loss) of $(21,786) and $(7,349) for 2003 and 2002,
respectively) $759,873,816 $ 767,768,706
___________________________________________________________________________________________
===========================================================================================
|
See Notes to Financial Statements.
FS-20
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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. Each company listed in the Schedule of Investments 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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. 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 ordinarily 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 Subchapter M 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. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are
FS-21
translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. 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.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator. The Fund pays AIM investment management and administration fees at an annual rate of 0.975% on the first $500 million of the Fund's average daily net assets, plus 0.95% on the next $500 million of the Fund's average daily net assets, plus 0.925% on the next $500 million of the Fund's average daily net assets, plus 0.90% on the Fund's average daily net assets exceeding $1.5 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A, Class B and Class C shares to 2.00%, 2.50% and 2.50%, respectively. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. 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 (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the year ended October 31, 2003, AIM waived fees of $7,033.
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 October 31, 2003, AIM was paid $185,138 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $1,405,408 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 and Class C 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, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. 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 October 31, 2003, the Class A, Class B and Class C shares paid $2,582,635, $1,745,344 and $433,411, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance
FS-22
to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $128,248 in front-end sales commissions from the sale of Class A shares and $688, $258 and $9,253 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $12,198 and reductions in custodian fees of $626 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $12,824.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $3,453 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the reporting period, the Fund was a participant in a committed line of credit facility with a syndicate administered by Citibank, N.A. The Fund could 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 were parties to the line of credit could borrow on a first come, first served basis. The funds which were party to the line of credit were charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee was allocated among the funds based on their respective average net assets for the period. The committed line of credit facility expired May 20, 2003.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under either the uncommitted unsecured revolving line of credit facility or the committed line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
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 of the loaned securities determined daily. 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, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan.
At October 31, 2003, securities with an aggregate value of $107,245,441 were on loan to brokers. The loans were secured by cash collateral of $109,555,781 received by the Fund and subsequently invested in affiliated money market funds. For the year ended October 31, 2003 the Fund received fees of $180,024 for securities lending.
NOTE 7--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
-------------------------------------------------------------------------------
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------
Beginning of year -- $ --
-------------------------------------------------------------------------------
Written 1,600 342,187
-------------------------------------------------------------------------------
Closed (100) (16,199)
-------------------------------------------------------------------------------
Exercised (500) (113,495)
-------------------------------------------------------------------------------
Expired (1,000) (212,493)
===============================================================================
End of year -- $ --
_______________________________________________________________________________
===============================================================================
|
FS-23
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the years ended October 31, 2003 and 2002 was as follows:
2003 2002
-------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 0 $ 46,090,015
-------------------------------------------------------------------------------
Long-term capital gain 0 74,793,784
===============================================================================
Total distributions $ 0 $120,883,799
_______________________________________________________________________________
===============================================================================
|
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Unrealized appreciation -- investments $ 49,517,810 ------------------------------------------------------------------------------------------ Temporary book/tax differences (21,786) ------------------------------------------------------------------------------------------ Capital loss carryforward (1,373,462) ------------------------------------------------------------------------------------------ Shares of beneficial interest 711,751,254 ========================================================================================== Total net assets $ 759,873,816 __________________________________________________________________________________________ ========================================================================================== |
The difference between book-basis and tax-basis unrealized appreciation 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 difference is attributable primarily to the tax deferral of losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation (depreciation) on foreign currencies of $(103,378).
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 the deferral of trustee compensation and trustee retirement plan expenses.
The Fund has a capital loss carryforward for tax purposes which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD
--------------------------------------------------------------------------------
October 31, 2010 $1,373,462
--------------------------------------------------------------------------------
Total capital loss carryforward $1,373,462
________________________________________________________________________________
================================================================================
|
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $684,276,149 and $757,561,090, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT
SECURITIES ON A TAX BASIS
-------------------------------------------------------------------------------
Aggregate unrealized appreciation of investment securities $ 75,575,494
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (25,954,306)
===============================================================================
Net unrealized appreciation of investment securities $ 49,621,188
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $790,527,516.
|
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
As a result of differing book/tax treatment of foreign currency transactions and net operating losses, on October 31, 2003, undistributed net investment income was increased by $5,106,815, undistributed net realized gain (loss) was decreased by $1,049,195 and shares of beneficial interest decreased by $4,057,620. This reclassification had no effect on the net assets of the Fund.
FS-24
NOTE 11--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2003 2002
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,926,329 $ 86,888,575 6,517,505 $ 172,255,113
------------------------------------------------------------------------------------------------------------------------
Class B 1,509,164 30,779,326 4,072,845 101,210,611
------------------------------------------------------------------------------------------------------------------------
Class C 408,103 8,332,961 1,519,053 37,639,046
========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 2,814,476 75,259,155
------------------------------------------------------------------------------------------------------------------------
Class B -- -- 1,272,073 31,496,539
------------------------------------------------------------------------------------------------------------------------
Class C -- -- 231,214 5,727,184
========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 572,274 12,498,133 950,595 24,572,842
------------------------------------------------------------------------------------------------------------------------
Class B (622,092) (12,498,133) (1,029,485) (24,572,842)
========================================================================================================================
Reacquired:
Class A (6,006,816) (133,474,779) (6,136,679) (156,257,768)
------------------------------------------------------------------------------------------------------------------------
Class B (1,845,284) (37,153,779) (3,042,509) (71,048,972)
------------------------------------------------------------------------------------------------------------------------
Class C (703,065) (14,239,365) (785,681) (17,984,757)
========================================================================================================================
(2,761,387) $ (58,867,061) 6,383,407 $ 178,296,151
________________________________________________________________________________________________________________________
========================================================================================================================
|
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.41 $ 29.93 $ 30.12 $ 24.00 $ 20.15
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.13) (0.29)(a) (0.39)(a) (0.22)(a) (0.19)(a)
------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.81 (3.17) 3.44 8.62 4.04
============================================================================================================
Total from investment operations 1.68 (3.46) 3.05 8.40 3.85
============================================================================================================
Less distributions from net realized
gains -- (4.06) (3.24) (2.28) --
============================================================================================================
Net asset value, end of period $ 24.09 $ 22.41 $ 29.93 $ 30.12 $ 24.00
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 7.50% (13.76)% 10.85% 38.49% 19.11%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $536,746 $533,216 $588,072 $460,445 $357,747
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net
assets 1.94%(c) 1.86% 1.75% 1.73% 1.82%
============================================================================================================
Ratio of net investment income (loss)
to average net assets (0.56)%(c) (1.10)% (1.28)% (0.85)% (0.81)%
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate 99% 153% 207% 242% 123%
____________________________________________________________________________________________________________
============================================================================================================
|
(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 $516,526,927.
FS-25
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.66 $ 28.03 $ 28.53 $ 22.96 $ 19.37
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23) (0.38)(a) (0.51)(a) (0.34)(a) (0.30)(a)
------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.66 (2.93) 3.25 8.19 3.89
============================================================================================================
Total from investment operations 1.43 (3.31) 2.74 7.85 3.59
============================================================================================================
Less distributions from net realized
gains -- (4.06) (3.24) (2.28) --
============================================================================================================
Net asset value, end of period $ 22.09 $ 20.66 $ 28.03 $ 28.53 $ 22.96
____________________________________________________________________________________________________________
============================================================================================================
Total return(b) 6.92% (14.21)% 10.32% 37.78% 18.53%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $179,646 $187,793 $219,036 $144,861 $102,916
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net
assets 2.44%(c) 2.36% 2.25% 2.23% 2.33%
============================================================================================================
Ratio of net investment income (loss)
to average net assets (1.06)%(c) (1.60)% (1.78)% (1.35)% (1.32)%
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate 99% 153% 207% 242% 123%
____________________________________________________________________________________________________________
============================================================================================================
|
(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 $174,534,434.
CLASS C
----------------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
YEAR ENDED OCTOBER 31, COMMENCED) TO
------------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.67 $ 28.03 $ 28.53 $ 22.96 $22.50
--------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23) (0.38)(a) (0.51)(a) (0.34)(a) (0.21)(a)
--------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 1.67 (2.92) 3.25 8.19 0.67
==============================================================================================================
Total from investment operations 1.44 (3.30) 2.74 7.85 0.46
==============================================================================================================
Less distributions from net realized
gains -- (4.06) (3.24) (2.28) --
==============================================================================================================
Net asset value, end of period $ 22.11 $ 20.67 $ 28.03 $ 28.53 $22.96
______________________________________________________________________________________________________________
==============================================================================================================
Total return(b) 6.97% (14.18)% 10.32% 37.77% 2.04%
______________________________________________________________________________________________________________
==============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $43,482 $46,759 $36,366 $12,339 $1,278
______________________________________________________________________________________________________________
==============================================================================================================
Ratio of expenses to average net
assets 2.44%(c) 2.36% 2.25% 2.23% 2.33%(d)
==============================================================================================================
Ratio of net investment income (loss)
to average net assets (1.06)%(c) (1.60)% (1.78)% (1.35)% (1.32)%(d)
______________________________________________________________________________________________________________
==============================================================================================================
Portfolio turnover rate(e) 99% 153% 207% 242% 123%
______________________________________________________________________________________________________________
==============================================================================================================
|
(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 sales charges
and is not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $43,341,102.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-26
NOTE 13--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-27
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of AIM Libra 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 Libra Fund (one of the funds constituting AIM Investment Funds; hereafter referred to as the "Fund") at October 31, 2003, the results of its operations, the changes in its net assets and the financial highlights for the year then ended, 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 audit. We conducted our audit 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 audit, which included confirmation of securities at October 31, 2003 by correspondence with the custodian, provides a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
December 16, 2003
Houston, Texas
FS-28
FINANCIALS
SCHEDULE OF INVESTMENTS
October 31, 2003
MARKET
SHARES VALUE
----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-96.68%
AEROSPACE & DEFENSE-0.94%
Engineered Support Systems, Inc. 5,900 $ 398,899
======================================================================
AIR FREIGHT & LOGISTICS-1.82%
Forward Air Corp.(a) 13,300 386,764
----------------------------------------------------------------------
Hunt (J.B.) Transport Services, Inc.(a) 15,200 385,776
======================================================================
772,540
======================================================================
AIRLINES-1.87%
AirTran Holdings, Inc.(a) 15,000 243,150
----------------------------------------------------------------------
ExpressJet Holdings, Inc.(a) 23,600 361,080
----------------------------------------------------------------------
Mesa Air Group, Inc.(a) 17,600 189,552
======================================================================
793,782
======================================================================
APPAREL RETAIL-10.08%
Aeropostale, Inc.(a) 12,500 385,625
----------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 7,700 275,660
----------------------------------------------------------------------
bebe stores, inc.(a) 12,600 351,540
----------------------------------------------------------------------
Chico's FAS, Inc.(a) 10,100 379,154
----------------------------------------------------------------------
Children's Place Retail Stores, Inc. (The)(a) 12,900 388,290
----------------------------------------------------------------------
Christopher & Banks Corp. 11,400 332,880
----------------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 12,800 391,936
----------------------------------------------------------------------
Hot Topic, Inc.(a) 12,200 350,262
----------------------------------------------------------------------
Jos. A. Bank Clothiers, Inc.(a) 8,800 381,656
----------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 10,900 321,114
----------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 13,900 320,951
----------------------------------------------------------------------
Urban Outfitters, Inc.(a) 12,000 400,320
======================================================================
4,279,388
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.93%
Coach, Inc.(a) 11,100 393,717
======================================================================
APPLICATION SOFTWARE-0.48%
RSA Security Inc.(a) 15,600 202,332
======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.92%
Legg Mason, Inc. 4,700 391,275
======================================================================
AUTO PARTS & EQUIPMENT-1.01%
Autoliv, Inc. 13,000 430,560
======================================================================
BIOTECHNOLOGY-3.28%
Celgene Corp.(a) 5,600 233,464
----------------------------------------------------------------------
Genentech, Inc.(a) 3,200 262,304
----------------------------------------------------------------------
Genzyme Corp.(a) 3,400 156,060
----------------------------------------------------------------------
Invitrogen Corp.(a) 6,100 387,899
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
BIOTECHNOLOGY-(CONTINUED)
QLT Inc. (Canada)(a) 22,700 $ 350,715
======================================================================
1,390,442
======================================================================
CASINOS & GAMING-1.52%
Station Casinos, Inc. 8,200 243,950
----------------------------------------------------------------------
WMS Industries Inc.(a) 17,300 400,149
======================================================================
644,099
======================================================================
COMMUNICATIONS EQUIPMENT-6.54%
ADTRAN, Inc. 5,400 367,362
----------------------------------------------------------------------
Avaya Inc.(a) 29,500 381,730
----------------------------------------------------------------------
Corning Inc.(a) 36,100 396,378
----------------------------------------------------------------------
Foundry Networks, Inc.(a) 11,600 269,816
----------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a) 8,800 388,256
----------------------------------------------------------------------
SeaChange International, Inc.(a) 25,000 385,000
----------------------------------------------------------------------
Sonus Networks, Inc.(a) 47,500 389,975
----------------------------------------------------------------------
UTStarcom, Inc.(a) 6,200 195,300
======================================================================
2,773,817
======================================================================
COMPUTER & ELECTRONICS RETAIL-0.76%
Best Buy Co., Inc. 5,500 320,705
======================================================================
COMPUTER HARDWARE-0.63%
Stratasys, Inc.(a) 5,600 266,560
======================================================================
COMPUTER STORAGE & PERIPHERALS-2.82%
Avid Technology, Inc.(a) 7,600 393,224
----------------------------------------------------------------------
Network Appliance, Inc.(a) 16,600 409,688
----------------------------------------------------------------------
SanDisk Corp.(a) 4,900 394,940
======================================================================
1,197,852
======================================================================
CONSUMER ELECTRONICS-0.97%
Harman International Industries, Inc. 3,200 410,240
======================================================================
CONSUMER FINANCE-1.66%
Capital One Financial Corp. 5,600 340,480
----------------------------------------------------------------------
CompuCredit Corp.(a) 18,400 363,768
======================================================================
704,248
======================================================================
DIVERSIFIED COMMERCIAL SERVICES-6.37%
Apollo Group, Inc.-Class A(a) 3,700 235,061
----------------------------------------------------------------------
Bright Horizons Family Solutions, Inc.(a) 8,700 373,752
----------------------------------------------------------------------
Career Education Corp.(a) 7,300 390,915
----------------------------------------------------------------------
Corinthian Colleges, Inc.(a) 6,200 383,904
----------------------------------------------------------------------
DiamondCluster International, Inc.(a) 43,900 390,710
----------------------------------------------------------------------
Education Management Corp.(a) 6,100 385,398
----------------------------------------------------------------------
|
FS-29
MARKET
SHARES VALUE
----------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES-(CONTINUED)
Exult Inc.(a) 7,100 $ 56,303
----------------------------------------------------------------------
ITT Educational Services, Inc.(a) 5,200 258,960
----------------------------------------------------------------------
University of Phoenix Online(a) 3,300 226,908
======================================================================
2,701,911
======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-1.02%
Lexar Media, Inc.(a) 18,900 432,999
======================================================================
ELECTRONIC MANUFACTURING SERVICES-1.21%
Trimble Navigation Ltd.(a) 3,500 96,775
----------------------------------------------------------------------
TTM Technologies, Inc.(a) 25,800 415,380
======================================================================
512,155
======================================================================
EMPLOYMENT SERVICES-0.30%
Administaff, Inc.(a) 10,900 126,222
======================================================================
FOOTWEAR-0.89%
K-Swiss Inc.-Class A 8,600 377,884
======================================================================
GENERAL MERCHANDISE STORES-1.31%
Dollar General Corp. 12,300 276,381
----------------------------------------------------------------------
Fred's, Inc. 7,400 278,832
======================================================================
555,213
======================================================================
HEALTH CARE DISTRIBUTORS-1.58%
Omnicare, Inc. 7,100 272,214
----------------------------------------------------------------------
Patterson Dental Co.(a) 6,200 396,676
======================================================================
668,890
======================================================================
HEALTH CARE EQUIPMENT-4.10%
Advanced Neuromodulation Systems, Inc.(a) 8,900 364,900
----------------------------------------------------------------------
ALARIS Medical Systems, Inc.(a) 21,091 327,121
----------------------------------------------------------------------
Boston Scientific Corp.(a) 4,000 270,880
----------------------------------------------------------------------
INAMED Corp.(a) 3,500 302,295
----------------------------------------------------------------------
Thoratec Corp.(a) 9,800 150,822
----------------------------------------------------------------------
VISX, Inc.(a) 13,400 325,084
======================================================================
1,741,102
======================================================================
HEALTH CARE FACILITIES-1.83%
Odyssey Healthcare, Inc.(a) 12,200 338,428
----------------------------------------------------------------------
Select Medical Corp.(a) 13,000 436,410
======================================================================
774,838
======================================================================
HEALTH CARE SERVICES-2.48%
American Healthways, Inc.(a) 8,900 368,905
----------------------------------------------------------------------
eResearch Technology, Inc.(a) 7,300 335,727
----------------------------------------------------------------------
Per-Se Technologies, Inc.(a) 25,700 349,520
======================================================================
1,054,152
======================================================================
HOME ENTERTAINMENT SOFTWARE-0.89%
Electronic Arts Inc.(a) 3,800 376,352
======================================================================
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
HOMEBUILDING-2.35%
Centex Corp. 3,800 $ 370,500
----------------------------------------------------------------------
D.R. Horton, Inc. 8,800 350,240
----------------------------------------------------------------------
Ryland Group, Inc. (The) 3,100 275,590
======================================================================
996,330
======================================================================
INTERNET RETAIL-1.30%
Netflix Inc.(a) 5,900 338,070
----------------------------------------------------------------------
Priceline.com Inc.(a) 7,600 213,256
======================================================================
551,326
======================================================================
INTERNET SOFTWARE & SERVICES-3.93%
Ask Jeeves, Inc.(a) 15,100 289,316
----------------------------------------------------------------------
Digital Insight Corp.(a) 2,400 50,352
----------------------------------------------------------------------
Digital River, Inc.(a) 13,800 378,120
----------------------------------------------------------------------
RADWARE Ltd. (Israel)(a) 13,600 314,840
----------------------------------------------------------------------
SupportSoft, Inc.(a) 21,000 251,790
----------------------------------------------------------------------
United Online, Inc.(a) 13,300 382,907
======================================================================
1,667,325
======================================================================
INVESTMENT BANKING & BROKERAGE-2.36%
Ameritrade Holding Corp.(a) 28,700 391,468
----------------------------------------------------------------------
E*TRADE Financial Corp.(a) 21,400 220,420
----------------------------------------------------------------------
Knight Trading Group, Inc.(a) 28,200 390,288
======================================================================
1,002,176
======================================================================
IT CONSULTING & OTHER SERVICES-0.80%
Cognizant Technology Solutions Corp.(a) 7,500 340,425
======================================================================
LEISURE PRODUCTS-0.95%
Marvel Enterprises, Inc.(a) 13,700 403,465
======================================================================
LIFE & HEALTH INSURANCE-0.90%
American Medical Security Group, Inc.(a) 16,700 381,094
======================================================================
MANAGED HEALTH CARE-2.89%
Coventry Health Care, Inc.(a) 6,300 344,925
----------------------------------------------------------------------
Humana Inc.(a) 16,100 326,669
----------------------------------------------------------------------
Mid Atlantic Medical Services, Inc.(a) 5,600 327,040
----------------------------------------------------------------------
Sierra Health Services, Inc.(a) 9,800 228,242
======================================================================
1,226,876
======================================================================
OIL & GAS EXPLORATION & PRODUCTION-0.99%
Nuevo Energy Co.(a) 21,300 419,184
======================================================================
PACKAGED FOODS & MEATS-1.08%
Stake Technology Ltd. (Canada)(a) 48,000 460,320
======================================================================
PHARMACEUTICALS-3.42%
Bradley Pharmaceuticals, Inc.(a) 12,900 346,623
----------------------------------------------------------------------
Kos Pharmaceuticals, Inc.(a) 10,400 412,984
----------------------------------------------------------------------
Pharmaceutical Resources, Inc.(a) 3,700 267,436
----------------------------------------------------------------------
|
FS-30
MARKET
SHARES VALUE
----------------------------------------------------------------------
PHARMACEUTICALS-(CONTINUED)
Taro Pharmaceutical Industries Ltd.
(Israel)(a) 4,400 $ 282,700
----------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 2,500 142,225
======================================================================
1,451,968
======================================================================
REINSURANCE-0.64%
Everest Re Group, Ltd. (Bermuda) 3,300 273,735
======================================================================
RESTAURANTS-0.42%
Starbucks Corp.(a) 5,700 180,120
======================================================================
SEMICONDUCTOR EQUIPMENT-1.69%
Amkor Technology, Inc.(a) 17,300 326,105
----------------------------------------------------------------------
Ultratech, Inc.(a) 12,500 390,125
======================================================================
716,230
======================================================================
SEMICONDUCTORS-7.50%
ATI Technologies Inc. (Canada)(a) 17,000 243,270
----------------------------------------------------------------------
Conexant Systems, Inc.(a) 26,300 153,329
----------------------------------------------------------------------
Cypress Semiconductor Corp.(a) 14,000 300,440
----------------------------------------------------------------------
Intel Corp. 12,000 396,600
----------------------------------------------------------------------
Marvell Technology Group Ltd. (Bermuda)(a) 6,700 293,929
----------------------------------------------------------------------
National Semiconductor Corp.(a) 11,100 450,993
----------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 5,800 329,440
----------------------------------------------------------------------
PMC-Sierra, Inc.(a) 18,900 343,413
----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-ADR (Taiwan)(a) 40,300 445,718
----------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 32,000 225,280
======================================================================
3,182,412
======================================================================
SPECIALTY STORES-3.61%
Advance Auto Parts, Inc.(a) 3,500 273,770
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
SPECIALTY STORES-(CONTINUED)
Guitar Center, Inc.(a) 4,800 $ 156,240
----------------------------------------------------------------------
PETCO Animal Supplies, Inc.(a) 7,900 262,122
----------------------------------------------------------------------
PETsMART, Inc. 11,000 281,710
----------------------------------------------------------------------
Sharper Image Corp.(a) 10,100 290,880
----------------------------------------------------------------------
Staples, Inc.(a) 10,000 268,200
======================================================================
1,532,922
======================================================================
SYSTEMS SOFTWARE-1.87%
Symantec Corp.(a) 6,300 419,895
----------------------------------------------------------------------
VERITAS Software Corp.(a) 10,300 372,345
======================================================================
792,240
======================================================================
THRIFTS & MORTGAGE FINANCE-1.32%
Doral Financial Corp. (Puerto Rico) 3,900 196,950
----------------------------------------------------------------------
New York Community Bancorp, Inc. 10,100 365,620
======================================================================
562,570
======================================================================
WIRELESS TELECOMMUNICATION SERVICES-0.45%
Western Wireless Corp.-Class A(a) 9,800 190,120
======================================================================
Total Common Stocks & Other Equity
Interests (Cost $36,194,134) 41,023,012
======================================================================
MONEY MARKET FUNDS-7.88%
STIC Liquid Assets Portfolio(b) 1,671,878 1,671,878
----------------------------------------------------------------------
STIC Prime Portfolio(b) 1,671,878 1,671,878
======================================================================
Total Money Market Funds (Cost
$3,343,756) 3,343,756
======================================================================
TOTAL INVESTMENTS-104.56% (Cost $39,537,890) 44,366,768
======================================================================
OTHER ASSETS LESS LIABILITIES-(4.56%) (1,933,614)
======================================================================
NET ASSETS-100.00% $42,433,154
______________________________________________________________________
======================================================================
|
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.
See Notes to Financial Statements.
FS-31
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2003
ASSETS:
Investments, at market value (cost
$36,194,134) $41,023,012
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $3,343,756) 3,343,756
-----------------------------------------------------------
Receivables for:
Investments sold 525,225
-----------------------------------------------------------
Fund shares sold 841,259
-----------------------------------------------------------
Dividends 3,695
-----------------------------------------------------------
Investment for deferred compensation plan 2,612
-----------------------------------------------------------
Other assets 32,373
===========================================================
Total assets 45,771,932
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 3,258,478
-----------------------------------------------------------
Fund shares reacquired 12,749
-----------------------------------------------------------
Deferred compensation plan 2,612
-----------------------------------------------------------
Accrued distribution fees 15,719
-----------------------------------------------------------
Accrued trustees' fees 563
-----------------------------------------------------------
Accrued transfer agent fees 3,679
-----------------------------------------------------------
Accrued operating expenses 44,978
===========================================================
Total liabilities 3,338,778
===========================================================
Net assets applicable to shares outstanding $42,433,154
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $37,731,933
-----------------------------------------------------------
Undistributed net investment income (loss) (2,859)
-----------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures contracts (124,798)
-----------------------------------------------------------
Unrealized appreciation of investment
securities 4,828,878
===========================================================
$42,433,154
___________________________________________________________
===========================================================
NET ASSETS:
Class A $32,398,306
___________________________________________________________
===========================================================
Class B $ 6,514,860
___________________________________________________________
===========================================================
Class C $ 3,519,988
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 2,384,810
___________________________________________________________
===========================================================
Class B 483,135
___________________________________________________________
===========================================================
Class C 260,772
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 13.59
-----------------------------------------------------------
Offering price per share:
Net asset value of $13.59 divided by 94.50%) $ 14.38
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 13.48
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 13.50
___________________________________________________________
===========================================================
|
See Notes to Financial Statements.
FS-32
STATEMENT OF OPERATIONS
For the year ended October 31, 2003
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $139) $ 16,416
------------------------------------------------------------------------
Dividends from affiliated money market funds 6,882
------------------------------------------------------------------------
Interest 6,071
========================================================================
Total investment income 29,369
========================================================================
EXPENSES:
Advisory fees 95,890
------------------------------------------------------------------------
Administrative services fees 50,000
------------------------------------------------------------------------
Custodian fees 17,589
------------------------------------------------------------------------
Distribution fees:
Class A 30,946
------------------------------------------------------------------------
Class B 14,276
------------------------------------------------------------------------
Class C 10,119
------------------------------------------------------------------------
Transfer agent fees 24,754
------------------------------------------------------------------------
Trustees' fees 9,136
------------------------------------------------------------------------
Registration and filing fees 59,424
------------------------------------------------------------------------
Printing and postage fees 20,412
------------------------------------------------------------------------
Professional fees 44,135
------------------------------------------------------------------------
Other 4,318
========================================================================
Total expenses 380,999
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (162,101)
========================================================================
Net expenses 218,898
========================================================================
Net investment income (loss) (189,529)
========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 130,084
------------------------------------------------------------------------
Futures contracts (76,395)
========================================================================
53,689
========================================================================
Change in net unrealized appreciation of investment
securities 4,828,878
------------------------------------------------------------------------
Net gain from investment securities and future contracts 4,882,567
========================================================================
Net increase in net assets resulting from operations $4,693,038
________________________________________________________________________
========================================================================
|
See Notes to Financial Statements.
FS-33
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 2003
2003
---------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (189,529)
---------------------------------------------------------------------------
Net realized gain from investment securities and futures
contracts 53,689
---------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 4,828,878
===========================================================================
Net increase in net assets resulting from operations 4,693,038
===========================================================================
Share transactions-net:
Class A 28,645,977
---------------------------------------------------------------------------
Class B 5,959,059
---------------------------------------------------------------------------
Class C 3,135,080
===========================================================================
Net increase (decrease) in net assets resulting from
share transactions 37,740,116
===========================================================================
Net increase in net assets 42,433,154
===========================================================================
NET ASSETS:
Beginning of year $ --
===========================================================================
End of year (including undistributed net investment income
(loss) of ($2,859)) $42,433,154
___________________________________________________________________________
===========================================================================
|
See Notes to Financial Statements.
FS-34
NOTES TO FINANCIAL STATEMENTS
October 31, 2003
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Libra Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each having an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to provide long-term growth of capital. Each company listed in the Schedule of Investments 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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Market trends, movement in exchange traded funds and ADRs, and the bid/ask quotes of brokers and information providers may be reviewed in the course of making a good faith determination of a security's fair value. 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 ordinarily 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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
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 Subchapter M 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. Any capital loss carryforwards listed are reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-35
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 also include to varying degrees, the risk of loss in excess of the variation margin.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator. The Fund pays AIM investment management and administration fees at an annual rate of 0.85% of the first $1 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets in excess of $1 billion. AIM has voluntarily agreed to waive fees and/or reimburse expenses (excluding interest, taxes, fund merger and reorganization expenses, extraordinary items, including other items designated as such by the Board of Trustees and increases in expenses due to expense offset arrangements, if any) for Class A, Class B and Class C shares to the extent necessary to limit the total annual fund operating expenses of Class A shares to 1.80%. Voluntary expense limitations may be modified or discontinued at any time without further notice to investors. 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 October 31, 2003, AIM waived fees of $95,890 and reimbursed expenses of $65,780.
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 October 31, 2003, AIM was paid $50,000 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the year ended October 31, 2003, AISI retained $16,450 for such services.
The Trust has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Class A, Class B and Class C 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, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, the AIM Distributors may pay a service fee up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares to selected dealers and financial institutions who furnish continuing personal shareholder services to their customers who purchase and own shares of such classes. 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 October 31, 2003, the Class A, Class B and Class C shares paid $30,946, $14,276 and $10,119, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the year ended October 31, 2003, AIM Distributors retained $23,736 in front-end sales commissions from the sale of Class A shares and $350, $0, and $18 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
For the year ended October 31, 2003, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $104 and reductions in custodian fees of $327 under expense offset arrangements which resulted in a reduction of the Fund's total expenses of $431.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. Certain former Trustees also participate in a retirement plan and receive benefits under such plan.
During the year ended October 31, 2003, the Fund paid legal fees of $1,396 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
The Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a
FS-36
loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
Effective June 26, 2003, the Fund became a participant in an uncommitted
unsecured revolving line of credit facility with State Street Bank and Trust
Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000 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 can borrow on a first
come, first served basis. Principal on each loan outstanding shall bear interest
at the bid rate quoted by SSB at the time of the request for the loan.
During the year ended October 31, 2003, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving line of credit facility.
Additionally the Fund is permitted to carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
There were no ordinary income or long-term capital gain distributions paid during the years ended October 31, 2003 and 2002.
Tax Components of Net Assets:
As of October 31, 2003, the components of net assets on a tax basis were as follows:
Undistributed ordinary income $ 37,084 ----------------------------------------------------------- Unrealized appreciation -- investments 4,666,996 ----------------------------------------------------------- Temporary book/tax differences (2,859) ----------------------------------------------------------- Shares of beneficial interest 37,731,933 =========================================================== Total net assets $42,433,154 ___________________________________________________________ =========================================================== |
The difference between book-basis and tax-basis unrealized appreciation 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 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 the deferral of trustee compensation.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the year ended October 31, 2003 was $72,361,931 and $36,297,881, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of investment
securities $4,966,715
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (299,719)
===========================================================
Net unrealized appreciation of investment
securities $4,666,996
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $39,699,772.
|
NOTE 8--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of nondeductible stock issuance costs and net operating losses, on October 31, 2003, undistributed net investment income was increased by $186,670, undistributed net realized gains decreased by $178,487 and shares of beneficial interest decreased by $8,183. This reclassification had no effect on the net assets of the Fund.
FS-37
NOTE 9--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. The Fund commenced operations November 1, 2002.
YEAR ENDED
OCTOBER 31,
------------------------
CHANGES IN SHARES OUTSTANDING 2003
--------------------------------------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------------
Sold:
Class A 2,569,911 $30,729,918
--------------------------------------------------------------------------------------
Class B 541,811 6,655,534
--------------------------------------------------------------------------------------
Class C 302,832 3,644,450
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 4,523 57,488
--------------------------------------------------------------------------------------
Class B (4,552) (57,488)
======================================================================================
Reacquired:
Class A (189,624) (2,141,429)
--------------------------------------------------------------------------------------
Class B (54,124) (638,987)
--------------------------------------------------------------------------------------
Class C (42,060) (509,370)
======================================================================================
3,128,717 $37,740,116
______________________________________________________________________________________
======================================================================================
|
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding during the year ended October 31, 2003.
CLASS A
-----------
YEAR ENDED
OCTOBER 31,
2003
---------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.18)(a)
---------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.77
===========================================================================
Total from investment operations 3.59
===========================================================================
Net asset value, end of period $ 13.59
___________________________________________________________________________
===========================================================================
Total return(b) 35.90%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,398
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets:
With fee waivers 1.80%(c)
---------------------------------------------------------------------------
Without fee waivers 3.24%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (1.54)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 325%
___________________________________________________________________________
===========================================================================
|
(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 $8,841,751.
FS-38
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
-----------
YEAR ENDED
OCTOBER 31,
2003
---------------------------------------------------------------------------
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a)
---------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.74
===========================================================================
Total from investment operations 3.48
===========================================================================
Net asset value, end of period $13.48
___________________________________________________________________________
===========================================================================
Total return(b) 34.80%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,515
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets:
With fee waivers 2.45%(c)
---------------------------------------------------------------------------
Without fee waivers 3.89%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (2.19)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 325%
___________________________________________________________________________
===========================================================================
|
(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 $1,427,570.
CLASS C
-----------
YEAR ENDED
OCTOBER 31,
2003
---------------------------------------------------------------------------
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.26)(a)
---------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 3.76
===========================================================================
Total from investment operations 3.50
===========================================================================
Net asset value, end of period $13.50
___________________________________________________________________________
===========================================================================
Total return(b) 35.00%
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,520
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets:
With fee waivers 2.45%(c)
---------------------------------------------------------------------------
Without fee waivers 3.89%(c)
===========================================================================
Ratio of net investment income (loss) to average net assets (2.19)%(c)
___________________________________________________________________________
===========================================================================
Portfolio turnover rate 325%
___________________________________________________________________________
===========================================================================
|
(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 $1,011,869.
NOTE 11--SUBSEQUENT EVENTS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the investment advisor to the INVESCO Funds.
On December 2, 2003, each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against INVESCO and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of INVESCO. Mr. Cunningham currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group, Inc., the parent company
FS-39
NOTE 11--SUBSEQUENT EVENTS (CONTINUED)
of AIM, and he also holds the position of Senior Vice President with AIM. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any of the funds in the AIM Family of Funds(R), which includes the INVESCO Funds (the "Funds") has been named as a defendant in any of these proceedings.
The SEC proceeding alleges that INVESCO failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding is also based on the circumstances described above. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding is also based on the circumstances described above. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
If INVESCO is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment advisor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Similarly, if Mr. Cunningham is unsuccessful in his defense of these proceedings, he could be barred from serving as an officer or director of any registered investment company. Such results could also affect the ability of AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if either of these results occurs, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There can be no assurance that such exemptive relief will be granted.
AIM has received inquiries from the SEC, the NASD, Inc., the NYAG and the Secretary of the Commonwealth of Massachusetts with respect to market timing, late trading, fair value pricing and other similar issues and AIM has been providing full cooperation with respect to these inquiries.
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
certain Funds, INVESCO, AIM, AMVESCAP and certain related parties, primarily
based upon the allegations in the complaints described above, but also regarding
the funds' fair valuation pricing methodology. Such lawsuits allege a variety of
theories for recovery including, but not limited to: (i) violation of various
provisions of the Federal securities laws; (ii) breach of fiduciary duty; and
(iii) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; interest and the payment of attorneys'
and experts' fees. Additional lawsuits arising out of these circumstances and
presenting similar allegations and requests for relief may be filed against the
Funds, INVESCO, AIM, AMVESCAP and related parties in the future.
As a result of these developments, investors in the Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund is unable to estimate the impact, if any, that the outcome of these matters described above may have on the Fund or AIM's financial condition.
FS-40
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
-------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-95.62%
BRAZIL-4.72%
Companhia de Bebidas das Americas-ADR
(Brewers) 81,600 $ 1,530,817
-------------------------------------------------------------------------
Companhia Siderurgica Nacional S.A. (Steel) 28,976 1,382,609
-------------------------------------------------------------------------
Companhia Vale do Rio Doce-ADR (Diversified
Metals & Mining) 21,000 820,890
-------------------------------------------------------------------------
Petroleo Brasileiro S.A.-ADR (Integrated Oil
& Gas) 132,200 3,298,390
-------------------------------------------------------------------------
Tele Norte Leste Participacoes S.A.-ADR
(Integrated Telecommunication Services)(a) 165,934 1,964,659
-------------------------------------------------------------------------
Uniao de Bancos Brasileiros S.A.-GDR
(Diversified Banks) 123,416 2,418,956
=========================================================================
11,416,321
=========================================================================
CAYMAN ISLANDS-0.96%
Global Bio-chem Technology Group Co. Ltd.
(Biotechnology) 1,548,000 1,131,260
-------------------------------------------------------------------------
Global Bio-chem Technology Group Co., Ltd.-
Wts., expiring 05/31/07
(Biotechnology)(b)(c) 193,500 --
-------------------------------------------------------------------------
Golden Meditech Co. Ltd. (Health Care
Equipment) 1,704,000 710,019
-------------------------------------------------------------------------
Xinao Gas Holdings Ltd. (Gas Utilities)(b) 1,083,700 468,922
=========================================================================
2,310,201
=========================================================================
CHILE-0.49%
Corpbanca-ADR (Regional Banks) (Acquired
11/19/03; Cost $1,079,889)(d) 49,400 1,191,123
=========================================================================
CHINA-2.98%
Anhui Conch Cement Co. Ltd.-Class H
(Construction Materials) 446,000 474,602
-------------------------------------------------------------------------
China Petroleum and Chemical Corp. (Sinopec)-
Class H (Integrated Oil & Gas) 4,252,000 1,471,884
-------------------------------------------------------------------------
China Shipping Development Co. Ltd.-Class H
(Marine)(b) 1,418,000 818,098
-------------------------------------------------------------------------
PICC Property & Casualty Co. Ltd.-Class H
(Property & Casualty Insurance)(b) 5,602,000 1,957,159
-------------------------------------------------------------------------
Tong Ren Tang Technologies Co. Ltd.-Class H
(Pharmaceuticals) 597,000 1,209,339
-------------------------------------------------------------------------
Weiqiao Textile Co. Ltd.-Class H (Textiles)
(Acquired 09/19/03-04/14/04; Cost
$1,217,429)(d) 982,200 1,271,856
=========================================================================
7,202,938
=========================================================================
CZECH REPUBLIC-0.44%
Komercni Banka A.S.-GDR (Diversified
Banks)(c) 29,700 1,066,996
=========================================================================
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
EGYPT-0.89%
Orascom Construction Industries (Construction
& Engineering) 139,106 $ 2,154,716
=========================================================================
GREECE-0.60%
Coca-Cola Hellenic Bottling Co. S.A. (Soft
Drinks)(c) 55,000 1,451,957
=========================================================================
HONG KONG-2.58%
Cathay Pacific Airways Ltd. (Airlines) 930,000 1,687,159
-------------------------------------------------------------------------
CNOOC Ltd. (Oil & Gas Exploration &
Production) 4,815,000 1,743,939
-------------------------------------------------------------------------
COFCO International Ltd. (Packaged Foods &
Meats) 1,452,000 614,323
-------------------------------------------------------------------------
Denway Motors Ltd. (Automobile Manufacturers) 1,852,000 884,471
-------------------------------------------------------------------------
Giordano International Ltd. (Apparel Retail) 2,262,000 1,297,783
=========================================================================
6,227,675
=========================================================================
HUNGARY-2.71%
Gedeon Richter Rt. (Pharmaceuticals)(c) 19,500 1,969,749
-------------------------------------------------------------------------
OTP Bank Rt. (Diversified Banks)(b)(c) 146,500 2,707,175
-------------------------------------------------------------------------
OTP Bank Rt.-GDR REGS (Diversified
Banks) (Acquired 01/14/03-04/15/03; Cost
$1,017,884)(b)(c)(d) 49,100 1,875,620
-------------------------------------------------------------------------
Technoimpex (Multi-Sector Holdings) (Acquired
11/22/90; Cost $2,989,406)(b)(c)(d)(e) 1,400 --
=========================================================================
6,552,544
=========================================================================
INDIA-5.45%
HDFC Bank Ltd.-ADR (Diversified Banks)(b) 91,761 2,661,069
-------------------------------------------------------------------------
Infosys Technologies Ltd.-ADR (IT Consulting
& Services)(a) 52,600 4,259,022
-------------------------------------------------------------------------
Ranbaxy Laboratories Ltd.-GDR
(Pharmaceuticals) (Acquired 10/22/03; Cost
$1,258,200)(c)(d)(e) 54,000 1,309,500
-------------------------------------------------------------------------
Ranbaxy Laboratories Ltd.-GDR
(Pharmaceuticals) 48,000 1,164,000
-------------------------------------------------------------------------
Tata Motors Ltd.-GDR (Automobile
Manufacturers) (Acquired 10/22/03-01/27/04;
Cost $1,246,879)(c)(d)(e) 134,000 1,386,900
-------------------------------------------------------------------------
Tata Motors Ltd.-GDR (Automobile
Manufacturers)(a) 232,000 2,401,200
=========================================================================
13,181,691
=========================================================================
|
FS-41
MARKET
SHARES VALUE
-------------------------------------------------------------------------
INDONESIA-1.65%
PT Astra Agro Lestari TBK (Agricultural
Products) 6,074,500 $ 1,590,726
-------------------------------------------------------------------------
PT Telekomunikasi Indonesia (Integrated
Telecommunication Services) 2,605,500 2,388,054
=========================================================================
3,978,780
=========================================================================
ISRAEL-2.52%
Taro Pharmaceutical Industries Ltd.
(Pharmaceuticals)(b) 45,800 1,980,850
-------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Pharmaceuticals) 66,800 4,112,208
=========================================================================
6,093,058
=========================================================================
LUXEMBOURG-1.50%
Quilmes Industrial S.A.-ADR (Brewers)(b) 110,000 2,006,400
-------------------------------------------------------------------------
Tenaris S.A. (Oil & Gas Equipment & Services) 5 14
-------------------------------------------------------------------------
Tenaris S.A.-ADR (Oil & Gas Equipment &
Services) 53,968 1,618,500
=========================================================================
3,624,914
=========================================================================
MALAYSIA-3.52%
Genting Berhad (Casinos & Gaming) 462,000 2,006,053
-------------------------------------------------------------------------
IOI Corp. Berhad (Agricultural Products) 1,098,000 2,614,974
-------------------------------------------------------------------------
Maxis Communications Berhad (Wireless
Telecommunications Services) 1,228,000 2,811,474
-------------------------------------------------------------------------
Public Bank Berhad (Diversified Banks) 1,186,000 1,067,400
=========================================================================
8,499,901
=========================================================================
MEXICO-7.19%
Alfa, S.A.-Class A (Industrial Conglomerates) 908,000 2,976,958
-------------------------------------------------------------------------
America Movil S.A. de C.V.-Series L-ADR
(Wireless Telecommunication Services) 139,900 4,728,620
-------------------------------------------------------------------------
Cemex S.A. de C.V.-Wts., expiring 12/21/04
(Construction Materials) (Acquired
12/16/99; Cost $528)(d)(e)(f) 1,508 1,453
-------------------------------------------------------------------------
Consorcio ARA, S.A. de C.V. (Homebuilding)(b) 473,300 1,285,184
-------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V.-Series B
(Homebuilding)(b) 203,000 1,161,118
-------------------------------------------------------------------------
Grupo Financiero Banorte S.A. de C.V.-Class O
(Diversified Banks) 346,300 1,228,498
-------------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 66,128 2,882,520
-------------------------------------------------------------------------
Wal-Mart de Mexico S.A. de C.V.-Series V
(Hypermarkets & Super Centers) 1,077,100 3,132,284
=========================================================================
17,396,635
=========================================================================
PHILIPPINES-2.19%
Philippine Long Distance Telephone Co.
(Integrated Telecommunication Services)(b) 222,000 4,279,900
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
PHILIPPINES-(CONTINUED)
SM Prime Holdings (Real Estate Management &
Development) 9,095,000 $ 1,006,587
=========================================================================
5,286,487
=========================================================================
RUSSIA-6.76%
AO VimpelCom-ADR (Wireless Telecommunication
Services)(b) 39,200 3,518,592
-------------------------------------------------------------------------
LUKOIL-ADR (Integrated Oil & Gas) 61,158 6,661,329
-------------------------------------------------------------------------
Mobile Telesystems-ADR (Wireless
Telecommunication Services)(a) 42,700 4,609,892
-------------------------------------------------------------------------
YUKOS-ADR (Integrated Oil & Gas) 34,936 1,565,133
=========================================================================
16,354,946
=========================================================================
SOUTH AFRICA-7.42%
Barloworld Ltd. (Industrial Conglomerates)(c) 121,900 1,213,934
-------------------------------------------------------------------------
Foschini Ltd. (Apparel Retail)(c) 658,400 1,869,224
-------------------------------------------------------------------------
Gold Fields Ltd. (Gold)(c) 59,100 595,759
-------------------------------------------------------------------------
Impala Platinum Holdings Ltd. (Precious
Metals & Minerals)(c) 14,101 951,279
-------------------------------------------------------------------------
JD Group Ltd. (Home Improvement Retail)(c) 210,000 1,230,726
-------------------------------------------------------------------------
Massmart Holdings Ltd. (Hypermarkets & Super
Centers) 488,000 2,155,680
-------------------------------------------------------------------------
Naspers Ltd.-Class N (Broadcasting & Cable
TV)(c) 387,000 2,589,661
-------------------------------------------------------------------------
Standard Bank Group Ltd. (Diversified
Banks)(a) 781,900 4,485,661
-------------------------------------------------------------------------
Telkom South Africa Ltd. (Integrated
Telecommunication Services)(c) 264,400 2,850,237
=========================================================================
17,942,161
=========================================================================
SOUTH KOREA-16.82%
Baiksan OPC Co., Ltd. (Electronic Equipment
Manufacturers) 85,537 984,147
-------------------------------------------------------------------------
Cheil Communications Inc. (Advertising) 11,500 1,607,364
-------------------------------------------------------------------------
CJ Corp. (Packaged Foods & Meats) 63,200 3,748,856
-------------------------------------------------------------------------
Hana Bank (Diversified Banks) 334,200 7,220,326
-------------------------------------------------------------------------
Hankook Tire Co. Ltd. (Tires & Rubber) 174,700 1,417,432
-------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.
(Department Stores) 83,000 2,242,383
-------------------------------------------------------------------------
Hyundai Motor Co., Ltd. (Automobile
Manufacturers) 34,900 1,331,039
-------------------------------------------------------------------------
Kook Soon Dang Brewery Co., Ltd. (Packaged
Foods & Meats) 30,796 477,681
-------------------------------------------------------------------------
POSCO-ADR (Steel) 113,200 3,480,900
-------------------------------------------------------------------------
Samsung Electronics Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 07/25/01-07/26/01; Cost
$715,479)(d)(e) 24,200 3,363,800
-------------------------------------------------------------------------
|
FS-42
MARKET
SHARES VALUE
-------------------------------------------------------------------------
SOUTH KOREA-(CONTINUED)
Samsung Electronics Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 11/03/00-08/29/01; Cost
$2,632,053)(c)(d)(e) 32,023 $ 7,472,147
-------------------------------------------------------------------------
Samsung Electronics Co., Ltd.-Pfd.
(Electronic Equipment Manufacturers) 11,300 3,120,297
-------------------------------------------------------------------------
Shinsegae Co., Ltd. (Department Stores) 7,800 1,761,623
-------------------------------------------------------------------------
SK Telecom Co., Ltd. (Wireless
Telecomunication Services) 2,700 460,221
-------------------------------------------------------------------------
SK Telecom Co., Ltd.-ADR (Wireless
Telecommunication Services)(a) 98,492 1,989,538
=========================================================================
40,677,754
=========================================================================
TAIWAN-15.78%
Asia Optical Co., Inc. (Photographic
Products) 225,000 1,577,906
-------------------------------------------------------------------------
AU Optronics Corp.-ADR (Electronic Equipment
Manufacturers)(a) 87,100 1,870,908
-------------------------------------------------------------------------
Catcher Technology Co., Ltd. (Computer
Storage & Peripherals) 373,000 1,553,841
-------------------------------------------------------------------------
Chi Mei Optoelectronics Corp. (Electronic
Equipment Manufacturers)(b) 950,000 2,035,694
-------------------------------------------------------------------------
Chinatrust Financial Holding Co. Ltd.
(Diversified Banks) 3,196,000 3,419,462
-------------------------------------------------------------------------
CyberLink Corp. (Application Software) 310,000 1,254,233
-------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.
(Electronic Equipment Manufacturers) 170,400 668,996
-------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd.-GDR REGS
(Electronic Equipment Manufacturers)
(Acquired 08/14/02-03/10/03; Cost
$1,511,234)(a)(d)(e) 246,126 2,261,898
-------------------------------------------------------------------------
Ichia Technologies, Inc. (Computer Storage &
Peripherals)(b) 596,000 1,500,405
-------------------------------------------------------------------------
Largan Precision Co., Ltd. (Photographic
Products) 131,000 1,460,485
-------------------------------------------------------------------------
MediaTek Inc. (Semiconductors) 268,000 2,546,108
-------------------------------------------------------------------------
Merry Electronics Co., Ltd. (Consumer
Electronics) 1,170,000 2,857,764
-------------------------------------------------------------------------
Novatek Microelectronics Corp., Ltd.
(Semiconductors) 529,650 2,079,424
-------------------------------------------------------------------------
President Chain Store Corp. (Food Retail) 1,369,000 2,420,685
-------------------------------------------------------------------------
Siliconware Precision Industries Co.
(Semiconductors)(b) 2,315,000 2,025,894
-------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co.
Ltd.-Equity Participation Ctfs., expiring
01/14/05 (ABN AMRO) (Semiconductors)
(Acquired 01/02/03-03/10/03; Cost
$4,388,216)(d) 3,837,862 6,632,977
-------------------------------------------------------------------------
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
TAIWAN-(CONTINUED)
Waffer Technology Co., Ltd. (Industrial
Machinery) 386,000 $ 1,035,364
-------------------------------------------------------------------------
Ya Hsin Industrial Co., Ltd. (Electronic
Equipment Manufacturers) 770,000 962,298
=========================================================================
38,164,342
=========================================================================
THAILAND-4.11%
Bangkok Bank PCL-NVDR (Diversified
Banks)(b)(c) 1,126,000 2,656,854
-------------------------------------------------------------------------
Kasikornbank PCL (Diversified Banks)(b) 2,016,000 2,441,348
-------------------------------------------------------------------------
Siam Cement PCL (The) (Construction
Materials) 174,000 938,427
-------------------------------------------------------------------------
Siam Commercial Bank PCL (Diversified Banks) 2,450,000 2,829,276
-------------------------------------------------------------------------
Sino Thai Engineering & Construction PCL
(Construction & Engineering)(c) 2,940,000 1,071,760
=========================================================================
9,937,665
=========================================================================
TURKEY-1.32%
Haci Omer Sabanci Holding A.S. (Multi-Sector
Holdings)(c) 481,759,257 1,560,059
-------------------------------------------------------------------------
Haci Omer Sabanci Holding A.S.-Bonus Shares
(Multi-Sector Holdings) 96,351,851 301,764
-------------------------------------------------------------------------
Koc Holding A.S. (Multi-Sector
Holdings)(b)(c) 287,319,455 1,317,293
=========================================================================
3,179,116
=========================================================================
UNITED KINGDOM-3.02%
Anglo American PLC (Diversified Metals &
Mining)(c) 369,600 7,298,866
=========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $167,142,553) 231,190,787
=========================================================================
PRINCIPAL
AMOUNT
BONDS-0.00%
BRAZIL-0.00%
Companhia Vale Do Rio Doce, Non Conv. Bond
(Diversified Metals & Mining) 0.00%,
12/31/09 (Acquired 01/22/99; Cost $0) (Cost
$0)(c)(d)(e)(g)(h) BRL 276 0
=========================================================================
SHARES
MONEY MARKET FUNDS-3.77%
Liquid Assets Portfolio-Institutional
Class(i) 4,561,857 4,561,857
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(i) 4,561,857 4,561,857
=========================================================================
Total Money Market Funds (Cost
$9,123,714) 9,123,714
=========================================================================
TOTAL INVESTMENTS-99.39% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $176,266,267) 240,314,501
=========================================================================
|
FS-43
MARKET
SHARES VALUE
-------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-5.78%
Liquid Assets Portfolio-Institutional
Class(i)(j) 6,989,446 $ 6,989,446
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(i)(j) 6,989,446 6,989,446
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $13,978,892) 13,978,892
=========================================================================
TOTAL INVESTMENTS-105.17% (Cost $190,245,159) 254,293,393
=========================================================================
OTHER ASSETS LESS LIABILITIES-(5.17%) (12,497,890)
=========================================================================
NET ASSETS-100.00% $241,795,503
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt BRL - Brazilian Dollar Conv. - Convertible Ctfs. - Certificates GDR - Global Depositary Receipt NVDR - Non-Voting Depositary Receipt Pfd. - Preferred REGS - Regulation S Wts. - Warrants |
Notes to Schedule of Investments:
(a) All or a portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(b) Non-income producing security.
(c) Security fair valued in accordance with the procedures established by the
Board of Trustees. The aggregate market value of these securities at
04/30/04 was $44,445,696 which represented 17.48% of the Fund's total
investments. See Note 1A.
(d) Security not registered under the Securities Act of 1933, as amended (e.g.,
the security was purchased in a Rule 144A transaction or a Regulation D
transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional
buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at 04/30/04 was $26,767,274,
which represented 11.07% of the Fund's net assets. Unless otherwise
indicated, these securities are not considered to be illiquid.
(e) Security considered to be illiquid. The aggregate market value of these
securities considered illiquid at 04/30/04 was $15,795,698 which represented
6.53% of the Fund's net assets.
(f) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(g) Foreign denominated security. Par value is denominated in currency
indicated.
(h) Zero coupon bond issued at a discount. The interest rate shown represents
the yield to maturity at issue.
(i) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(j) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-44
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$167,142,553)* $ 231,190,787
------------------------------------------------------------
Investments in affiliated money market funds
(cost $23,102,606) 23,102,606
============================================================
Total investments (cost $190,245,159) 254,293,393
============================================================
Foreign currencies, at value (cost
$6,674,005) 6,677,487
------------------------------------------------------------
Receivables for:
Investments sold 3,508,415
------------------------------------------------------------
Fund shares sold 308,125
------------------------------------------------------------
Dividends 853,046
------------------------------------------------------------
Amount due from advisor 39,977
------------------------------------------------------------
Investment for deferred compensation and
retirement plans 12,169
------------------------------------------------------------
Other assets 42,682
============================================================
Total assets 265,735,294
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 2,767,431
------------------------------------------------------------
Fund shares reacquired 6,234,679
------------------------------------------------------------
Deferred compensation and retirement plans 15,011
------------------------------------------------------------
Collateral upon return of securities loaned 13,978,892
------------------------------------------------------------
Accrued distribution fees 172,796
------------------------------------------------------------
Accrued trustees' fees 1,142
------------------------------------------------------------
Accrued transfer agent fees 199,236
------------------------------------------------------------
Accrued operating expenses 570,604
============================================================
Total liabilities 23,939,791
============================================================
Net assets applicable to shares outstanding $ 241,795,503
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 422,156,487
------------------------------------------------------------
Undistributed net investment income (loss) (217,421)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (244,177,802)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 64,034,239
============================================================
$ 241,795,503
____________________________________________________________
============================================================
NET ASSETS:
Class A $ 205,120,538
____________________________________________________________
============================================================
Class B $ 29,632,425
____________________________________________________________
============================================================
Class C $ 7,042,540
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 18,144,829
____________________________________________________________
============================================================
Class B 2,663,299
____________________________________________________________
============================================================
Class C 633,707
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 11.30
------------------------------------------------------------
Offering price per share:
(Net asset value of $11.30 divided
by 95.25%) $ 11.86
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 11.13
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 11.11
____________________________________________________________
============================================================
|
* At April 30, 2004, securities with an aggregate market value of $13,357,188 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-45
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $255,337) $ 2,347,414
-------------------------------------------------------------------------
Dividends from affiliated money market funds* 67,936
-------------------------------------------------------------------------
Interest 5,785
=========================================================================
Total investment income 2,421,135
=========================================================================
EXPENSES:
Advisory fees 1,232,084
-------------------------------------------------------------------------
Administrative services fees 38,996
-------------------------------------------------------------------------
Custodian fees 104,541
-------------------------------------------------------------------------
Distribution fees:
Class A 519,174
-------------------------------------------------------------------------
Class B 159,503
-------------------------------------------------------------------------
Class C 31,534
-------------------------------------------------------------------------
Transfer agent fees 556,332
-------------------------------------------------------------------------
Trustees' fees 7,732
-------------------------------------------------------------------------
Other 130,609
=========================================================================
Total expenses 2,780,505
=========================================================================
Less: Fees waived and expense offset arrangements (154,295)
=========================================================================
Net expenses 2,626,210
=========================================================================
Net investment income (loss) (205,075)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (net of tax on sale of foreign
investments of $111,051 -- Note 1F) 19,546,524
-------------------------------------------------------------------------
Foreign currencies (67,933)
=========================================================================
19,478,591
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (net of change in estimated tax on
foreign investments held of $28,631 -- Note 1F) (1,766,968)
-------------------------------------------------------------------------
Foreign currencies 159
=========================================================================
(1,766,809)
=========================================================================
Net gain from investment securities and foreign currencies 17,711,782
=========================================================================
Net increase in net assets resulting from operations $17,506,707
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-46
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (205,075) $ 631,951
------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 19,478,591 5,656,632
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (1,766,809) 73,571,951
==========================================================================================
Net increase in net assets resulting from operations 17,506,707 79,860,534
==========================================================================================
Distributions to shareholders from net investment income:
Class A (387,395) --
------------------------------------------------------------------------------------------
Share transactions-net:
Class A (18,704,075) 18,123,053
------------------------------------------------------------------------------------------
Class B (2,768,378) (12,324,655)
------------------------------------------------------------------------------------------
Class C 2,455,566 200,503
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (19,016,887) 5,998,901
==========================================================================================
Net increase (decrease) in net assets (1,897,575) 85,859,435
==========================================================================================
NET ASSETS:
Beginning of period 243,693,078 157,833,643
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(217,421) and $375,049 for 2004 and
2003, respectively) $241,795,503 $243,693,078
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Developing Markets Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 primary investment objective is long-term growth of capital with a secondary objective of income. Companies are listed in the Schedule of Investments based on the country in which they are organized.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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
FS-47
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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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. REDEMPTION FEES -- Effective November 24, 2003, the Fund instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of
FS-48
market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
G. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.975% on the first
$500 million of the Fund's average daily net assets, plus 0.95% on the next $500
million of the Fund's average daily net assets, plus 0.925% on the next $500
million of the Fund's average daily net assets, plus 0.90% on the Fund's average
daily net assets in excess of $1.5 billion. The Fund's advisor has contractually
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. During periods of fee waivers or
reimbursements to the extent the annualized expense ratio does not exceed the
limit for the period committed, AIM will retain its ability to be reimbursed for
such fee waivers or reimbursements prior to the end of each fiscal year.
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 on investments by the Fund in such affiliated money market funds
(excluding investments made in affiliated money market funds with cash
collateral from securities loaned by the Fund, if any). For the six months ended
April 30, 2004, AIM waived fees of $151,823.
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 six months ended April 30, 2004, AIM was paid $38,996 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the six months ended April 30, 2004, AISI retained $232,919 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 and Class C 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, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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. Rule 12b-1 Plan fees on Class A shares issued as a result of conversion of shares from G.T. Developing Markets Fund, Inc. on October 31, 1997 and in connection with the AIM Eastern Europe Fund reorganization on September 10, 1999 are limited to 0.25% of the average net assets of the Fund's Class A shares issued in connection with such transactions. Pursuant to the Plans, for the six months ended April 30, 2004, the Class A, Class B and Class C shares paid $519,174, $159,503 and $31,534 respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $17,700 in front-end sales commissions from the sale of Class A shares and $119,702 $384, and $349 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemption by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
FS-49
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ 2,260,107 $ 26,439,778 $(24,138,028) $ -- $ 4,561,857 $16,627 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 2,260,107 26,439,778 (24,138,028) -- 4,561,857 16,203 --
=================================================================================================================================
Subtotal $ 4,520,214 $ 52,879,556 $(48,276,056) $ -- $ 9,123,714 $32,830 $ --
=================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME* GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ 6,672,818 $ 23,875,562 $(23,558,934) $ -- $ 6,989,446 $17,761 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 6,672,817 23,875,562 (23,558,933) -- 6,989,446 17,345 --
=================================================================================================================================
Subtotal $13,345,635 $ 47,751,124 $(47,117,867) $ -- $13,978,892 $35,106 $ --
=================================================================================================================================
Total $17,865,849 $100,630,680 $(95,393,923) $ -- $23,102,606 $67,936 $ --
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $22,289.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $1,906 and reductions in custodian fees of $566 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $2,472.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,641 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by
FS-50
paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $13,357,188 were on
loan to brokers. The loans were secured by cash collateral of $13,978,892
received by the Fund and subsequently invested in affiliated money market funds.
For the six months ended April 30, 2004, the Fund received dividends on cash
collateral net of fees paid to counterparties of $35,106 for securities lending
transactions.
NOTE 8--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2005 $ 95,190,215
---------------------------------------------------------
October 31, 2006 76,692,697
---------------------------------------------------------
October 31, 2007 9,273,499
---------------------------------------------------------
October 31, 2008 15,085,807
---------------------------------------------------------
October 31, 2009 59,191,538
---------------------------------------------------------
October 31, 2010 7,382,000
=========================================================
Total capital loss carryforward $262,815,756
_________________________________________________________
=========================================================
* Any capital loss carryforward listed is reduced for
limitations, if any, to the extent required by the
Internal Revenue Code.
|
NOTE 9--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended April 30, 2004 was $71,484,567 and $89,157,114, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $69,466,051
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (6,089,396)
===========================================================
Net unrealized appreciation of investment
securities $63,376,655
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $190,916,738.
|
FS-51
NOTE 10--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with a CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
-------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 2,538,124 $ 29,964,841 21,378,062 $175,888,823
-------------------------------------------------------------------------------------------------------------------------
Class B 483,067 5,591,636 687,629 5,832,379
-------------------------------------------------------------------------------------------------------------------------
Class C 677,460 7,732,743 3,620,023 28,027,976
=========================================================================================================================
Issued as reinvestment of dividends:
Class A 29,075 314,212 -- --
=========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 359,495 4,197,903 1,240,782 9,667,175
-------------------------------------------------------------------------------------------------------------------------
Class B (364,973) (4,197,903) (1,256,198) (9,667,175)
=========================================================================================================================
Reacquired:*
Class A (4,673,016) (53,181,031) (20,514,740) (167,432,945)
-------------------------------------------------------------------------------------------------------------------------
Class B (361,534) (4,162,111) (1,090,836) (8,489,859)
-------------------------------------------------------------------------------------------------------------------------
Class C (465,337) (5,277,177) (3,569,799) (27,827,473)
=========================================================================================================================
(1,777,639) $ (19,016,887) 494,923 $ 5,998,901
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
* Amount is net of redemption fees of $16,431, $2,373 and $564 for Class A, Class B and Class C shares for 2004, respectively.
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.52 $ 6.96 $ 6.32 $ 8.89 $ 9.86 $ 7.53
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.04(a) (0.01)(a) 0.15(a) 0.01(a) 0.06(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.81 3.52 0.74 (2.67) (0.95) 2.36
=================================================================================================================================
Total from investment operations 0.80 3.56 0.73 (2.52) (0.94) 2.42
=================================================================================================================================
Less distributions from net investment
income (0.02) -- (0.09) (0.05) (0.04) (0.12)
=================================================================================================================================
Redemption fees added to shares of
beneficial interest 0.00 -- -- -- 0.01 0.03
=================================================================================================================================
Net asset value, end of period $ 11.30 $ 10.52 $ 6.96 $ 6.32 $ 8.89 $ 9.86
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.62% 51.15% 11.37% (28.51)% (9.52)% 33.11%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $205,121 $209,221 $123,812 $110,756 $136,160 $157,198
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.00%(c) 2.00% 1.84% 1.76% 1.87% 1.91%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.12%(c) 2.33% 2.35% 2.26% 1.95% 2.38%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.08)%(c) 0.44% (0.07)% 1.95% 0.05% 0.68%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 30% 100% 109% 144% 192% 125%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$215,706,403.
(d) Not annualized for periods less than one year.
FS-52
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------------
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.36 $ 6.89 $ 6.25 $ 8.79 $ 9.79 $ 7.49
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.01)(a) (0.05)(a) 0.11(a) (0.06)(a) 0.01(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.80 3.48 0.73 (2.65) (0.94) 2.37
=================================================================================================================================
Total from investment operations 0.77 3.47 0.68 (2.54) (1.00) 2.38
=================================================================================================================================
Less distributions from net investment income -- -- (0.04) -- -- (0.08)
=================================================================================================================================
Redemption fees added to shares of beneficial
interest 0.00 -- -- -- -- --
=================================================================================================================================
Net asset value, end of period $ 11.13 $ 10.36 $ 6.89 $ 6.25 $ 8.79 $ 9.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.43% 50.36% 10.85% (28.90)% (10.21)% 32.14%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,632 $30,111 $31,465 $51,040 $79,754 $49,723
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers 2.52%(c) 2.53% 2.38% 2.35% 2.47% 2.51%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.64%(c) 2.86% 2.89% 2.85% 2.55% 2.98%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.60)%(c) (0.08)% (0.61)% 1.36% (0.56)% 0.08%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 30% 100% 109% 144% 192% 125%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$32,075,985.
(d) Not annualized for periods less than one year.
FS-53
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------------------------
MARCH 1, 1999
(DATE SALES
SIX MONTHS COMMENCED)
ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, ---------------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.34 $ 6.88 $ 6.25 $ 8.79 $ 9.79 $ 7.47
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.01)(a) (0.05)(a) 0.10(a) (0.06)(a) --(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.80 3.47 0.72 (2.64) (0.94) 2.32
=================================================================================================================================
Total from investment operations 0.77 3.46 0.67 (2.54) (1.00) 2.32
=================================================================================================================================
Less distributions from net investment
income -- -- (0.04) -- -- --
=================================================================================================================================
Redemption fees added to shares of
beneficial interest 0.00 -- -- -- -- --
=================================================================================================================================
Net asset value, end of period $11.11 $10.34 $ 6.88 $ 6.25 $ 8.79 $ 9.79
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 7.45% 50.29% 10.69% (28.90)% (10.21)% 31.06%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $7,043 $4,361 $2,557 $ 1,682 $ 1,618 $ 412
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers 2.52%(c) 2.53% 2.38% 2.35% 2.47% 2.51%(d)
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers 2.64%(c) 2.86% 2.89% 2.85% 2.55% 2.98%(d)
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (0.60)%(c) (0.08)% (0.61)% 1.36% (0.56)% 0.08%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 30% 100% 109% 144% 192% 125%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for period less than one year.
(c) Ratios are annualized and based on average daily net assets of
$6,341,370.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all
FS-54
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $23,940 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the
FS-55
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-56
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
MARKET
SHARES VALUE
-------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-62.09%
BIOTECHNOLOGY-8.79%
Alexion Pharmaceuticals, Inc.(a) 50,000 $ 1,126,000
-------------------------------------------------------------------------
Amgen Inc.(a) 700,000 39,389,000
-------------------------------------------------------------------------
BioMarin Pharmaceutical Inc.(a)(b) 40,000 276,800
-------------------------------------------------------------------------
Caliper Life Sciences, Inc.(a) 20,000 134,400
-------------------------------------------------------------------------
Corgentech Inc.(a)(b) 100,000 1,849,000
-------------------------------------------------------------------------
Cytokinetics, Inc.(a) 45,700 743,082
-------------------------------------------------------------------------
Eyetech Pharmaceutical Inc.(a) 50,000 1,787,500
-------------------------------------------------------------------------
Human Genome Sciences, Inc.(a) 80,000 976,000
-------------------------------------------------------------------------
Immunicon Corp.(a) 116,100 870,750
-------------------------------------------------------------------------
InterMune Inc.(a)(b) 425,000 6,268,750
-------------------------------------------------------------------------
Isis Pharmaceuticals, Inc.(a)(b) 1,900,000 13,813,000
-------------------------------------------------------------------------
Kosan Biosciences, Inc.(a) 103,000 1,423,460
-------------------------------------------------------------------------
Millennium Pharmaceuticals, Inc.(a) 50,000 749,500
-------------------------------------------------------------------------
Nabi Biopharmaceuticals(a) 10,000 163,500
-------------------------------------------------------------------------
Protein Design Labs, Inc.(a) 60,000 1,468,800
-------------------------------------------------------------------------
Renovis, Inc.(a) 15,000 164,400
-------------------------------------------------------------------------
Telik, Inc.(a) 20,000 469,400
=========================================================================
71,673,342
=========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.10%
Varian Inc.(a) 20,000 820,800
=========================================================================
HEALTH CARE DISTRIBUTORS-4.84%
McKesson Corp.(b) 1,200,000 39,432,000
=========================================================================
HEALTH CARE EQUIPMENT-5.94%
Apogent Technologies Inc.(a) 35,000 1,134,700
-------------------------------------------------------------------------
ATS Medical, Inc.(a)(c) 1,500,000 7,650,000
-------------------------------------------------------------------------
Beckman Coulter, Inc. 40,000 2,233,600
-------------------------------------------------------------------------
Becton, Dickinson & Co. 650,000 32,857,500
-------------------------------------------------------------------------
MedSource Technologies, Inc.(a) 35,000 241,850
-------------------------------------------------------------------------
SonoSite, Inc.(a) 200,000 4,304,000
=========================================================================
48,421,650
=========================================================================
HEALTH CARE FACILITIES-11.40%
Community Health Systems Inc.(a)(b) 1,000,000 25,790,000
-------------------------------------------------------------------------
HCA Inc. 1,000,000 40,630,000
-------------------------------------------------------------------------
Health Management Associates, Inc.-Class A(b) 1,100,000 25,443,000
-------------------------------------------------------------------------
Symbion, Inc.(a)(b) 63,400 1,033,420
=========================================================================
92,896,420
=========================================================================
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
HEALTH CARE SERVICES-1.26%
HMS Holdings Corp.(a)(c) 1,750,000 $ 10,237,500
=========================================================================
HEALTH CARE SUPPLIES-1.77%
Edwards Lifesciences Corp.(a) 150,000 5,169,000
-------------------------------------------------------------------------
Sola International Inc.(a)(b) 450,000 9,234,000
=========================================================================
14,403,000
=========================================================================
MANAGED HEALTH CARE-2.19%
PacifiCare Health Systems, Inc.(a) 500,000 17,880,000
=========================================================================
PHARMACEUTICALS-25.80%
Abbott Laboratories 750,000 33,015,000
-------------------------------------------------------------------------
Antigenics Inc.(a)(b) 154,600 1,474,884
-------------------------------------------------------------------------
Barrier Therapeutics Inc.(a) 54,800 767,200
-------------------------------------------------------------------------
Bristol-Myers Squibb Co. 800,000 20,080,000
-------------------------------------------------------------------------
Pfizer Inc.(b) 3,176,200 113,580,912
-------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 30,000 1,068,300
-------------------------------------------------------------------------
Wyeth 1,059,000 40,316,130
=========================================================================
210,302,426
=========================================================================
Total Domestic Common Stocks (Cost
$447,070,071) 506,067,138
=========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-35.36%
CANADA-0.10%
Angiotech Pharmaceuticals, Inc.
(Biotechnology)(a) 35,000 729,750
-------------------------------------------------------------------------
Inex Pharmaceuticals Corp.
(Pharmaceuticals)(a) 20,000 98,137
=========================================================================
827,887
=========================================================================
DENMARK-0.12%
Novo Nordisk A.S.-Class B
(Pharmaceuticals)(d) 20,000 952,674
=========================================================================
FRANCE-7.08%
Aventis S.A. (Pharmaceuticals)(b)(d) 630,000 47,692,246
-------------------------------------------------------------------------
Sanofi-Synthelabo S.A.
(Pharmaceuticals)(a)(b)(d) 160,000 9,984,613
=========================================================================
57,676,859
=========================================================================
GERMANY-0.25%
Altana A.G. (Pharmaceuticals)(b)(d) 20,000 1,265,664
-------------------------------------------------------------------------
Bayer A.G. (Diversified Chemicals)(a)(b)(d) 20,000 537,384
-------------------------------------------------------------------------
Schwarz Pharma A.G.
(Pharmaceuticals)(a)(b)(d) 10,000 281,605
=========================================================================
2,084,653
=========================================================================
|
FS-57
MARKET
SHARES VALUE
-------------------------------------------------------------------------
INDIA-0.06%
Lupin Ltd. (Pharmaceuticals)(a) 10,000 $ 181,538
-------------------------------------------------------------------------
Wockhardt Ltd. (Pharmaceuticals) 45,000 324,168
=========================================================================
505,706
=========================================================================
JAPAN-23.29%
Eisai Co., Ltd. (Pharmaceuticals) 1,504,000 38,382,625
-------------------------------------------------------------------------
Fujisawa Pharmaceutical Co. Ltd.
(Pharmaceuticals)(b) 1,960,000 45,496,833
-------------------------------------------------------------------------
Kyorin Pharmaceutical Co., Ltd.
(Pharmaceuticals)(b)(e) 1,307,000 18,144,235
-------------------------------------------------------------------------
Santen Pharmaceutical Co., Ltd.
(Pharmaceuticals) 50,000 784,163
-------------------------------------------------------------------------
Takeda Chemical Industries, Ltd.
(Pharmaceuticals) 970,000 39,063,349
-------------------------------------------------------------------------
Yamanouchi Pharmaceutical Co., Ltd.
(Pharmaceuticals) 1,440,000 47,956,561
=========================================================================
189,827,766
=========================================================================
NETHERLANDS-0.16%
Akzo Nobel N.V. (Diversified Chemicals)(b)(d) 35,000 1,269,945
=========================================================================
SWITZERLAND-1.21%
Novartis A.G. (Pharmaceuticals)(d) 20,000 893,400
-------------------------------------------------------------------------
Novartis A.G.-ADR (Pharmaceuticals) 200,000 8,960,000
=========================================================================
9,853,400
=========================================================================
|
-------------------------------------------------------------------------
MARKET
SHARES VALUE
UNITED KINGDOM-3.09%
GlaxoSmithKline PLC-ADR
(Pharmaceuticals)(a)(b) 600,000 $ 25,200,000
-------------------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests (Cost $241,770,729) 288,198,890
=========================================================================
MONEY MARKET FUNDS-2.66%
Liquid Assets Portfolio-Institutional
Class(f) 10,860,823 10,860,823
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f) 10,860,823 10,860,823
=========================================================================
Total Money Market Funds (Cost
$21,721,646) 21,721,646
=========================================================================
TOTAL INVESTMENTS-100.11% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $710,562,446) 815,987,674
=========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-14.97%
Liquid Assets Portfolio-Institutional
Class(f)(g) 61,018,976 61,018,976
-------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(f)(g) 61,018,976 61,018,976
=========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $122,037,952) 122,037,952
=========================================================================
TOTAL INVESTMENTS-115.08% (Cost $832,600,398) 938,025,626
=========================================================================
OTHER ASSETS LESS LIABILITIES-(15.08%) (122,922,469)
=========================================================================
NET ASSETS-100.00% $ 815,103,157
_________________________________________________________________________
=========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or portion of this security has been pledged as collateral for
securities lending transactions at April 30, 2004.
(c) The Investment Company Act of 1940 defines affiliates as those companies in
which a fund holds 5% or more of the outstanding voting securities. The Fund
has not owned enough of the outstanding voting securities of the issuer to
have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value as of 4/30/04 was $17,887,500, which represented
2.19% of the Fund's net assets. See Note 3.
(d) Security fair valued in accordance with the procedures established by the
Board of Trustees. The aggregate market value of these securities at
04/30/04 was $62,877,531 which represented 6.70% of the Fund's total
investments. See Note 1A.
(e) Security considered to be illiquid. The market value of this security
considered illiquid at 04/30/04 represented 2.23% of the Fund's net assets.
(f) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(g) 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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-58
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$680,793,315)* $776,378,528
-----------------------------------------------------------
Investments in affiliates ($151,807,083) 161,647,098
===========================================================
Total investments (cost $832,600,398) 938,025,626
===========================================================
Foreign currencies, at value (cost $574,109) 562,346
-----------------------------------------------------------
Receivables for:
Fund shares sold 933,537
-----------------------------------------------------------
Dividends 1,661,354
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 23,825
-----------------------------------------------------------
Other assets 53,107
===========================================================
Total assets 941,259,795
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,416,100
-----------------------------------------------------------
Fund shares reacquired 1,599,926
-----------------------------------------------------------
Deferred compensation and retirement plans 36,261
-----------------------------------------------------------
Collateral upon return of securities loaned 122,037,952
-----------------------------------------------------------
Accrued distribution fees 437,492
-----------------------------------------------------------
Accrued trustees' fees 1,143
-----------------------------------------------------------
Accrued transfer agent fees 486,733
-----------------------------------------------------------
Accrued operating expenses 141,031
===========================================================
Total liabilities 126,156,638
===========================================================
Net assets applicable to shares outstanding $815,103,157
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $688,793,853
-----------------------------------------------------------
Undistributed net investment income (loss) (4,067,842)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and option contracts 25,000,001
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 105,377,145
===========================================================
$815,103,157
___________________________________________________________
===========================================================
NET ASSETS:
Class A $581,615,827
___________________________________________________________
===========================================================
Class B $187,159,388
___________________________________________________________
===========================================================
Class C $ 46,327,942
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 21,867,065
___________________________________________________________
===========================================================
Class B 7,690,048
___________________________________________________________
===========================================================
Class C 1,902,239
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 26.60
-----------------------------------------------------------
Offering price per share:
(Net asset value of $26.60 divided by
95.25%) $ 27.93
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 24.34
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 24.35
___________________________________________________________
===========================================================
|
* At April 30, 2004, securities with an aggregate market value of $86,694,543 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-59
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $92,342) $ 3,754,252
-------------------------------------------------------------------------
Dividends and interest from affiliates* 564,873
=========================================================================
Total investment income 4,319,125
=========================================================================
EXPENSES:
Advisory fees 3,922,598
-------------------------------------------------------------------------
Administrative services fees 103,409
-------------------------------------------------------------------------
Custodian fees 147,575
-------------------------------------------------------------------------
Distribution fees:
Class A 1,440,095
-------------------------------------------------------------------------
Class B 952,187
-------------------------------------------------------------------------
Class C 231,245
-------------------------------------------------------------------------
Transfer agent fees 1,314,181
-------------------------------------------------------------------------
Trustees' fees 10,698
-------------------------------------------------------------------------
Other 258,177
=========================================================================
Total expenses 8,380,165
=========================================================================
Less: Fees waived and expense offset arrangements (14,984)
=========================================================================
Net expenses 8,365,181
=========================================================================
Net investment income (loss) (4,046,056)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 29,764,168
-------------------------------------------------------------------------
Foreign currencies 563,514
-------------------------------------------------------------------------
Option contracts written (2,953,328)
=========================================================================
27,374,354
=========================================================================
Change in net unrealized appreciation of:
Investment securities 54,803,149
-------------------------------------------------------------------------
Foreign currencies 55,295
=========================================================================
54,858,444
=========================================================================
Net gain from investment securities, foreign currencies and
option contracts 82,232,798
=========================================================================
Net increase in net assets resulting from operations $78,186,742
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of fees paid to security lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-60
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (4,046,056) $ (5,121,252)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 27,374,354 22,726,315
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, and foreign currencies 54,858,444 33,367,108
==========================================================================================
Net increase in net assets resulting from operations 78,186,742 50,972,171
==========================================================================================
Share transactions-net:
Class A (10,697,034) (34,088,071)
------------------------------------------------------------------------------------------
Class B (10,739,587) (18,872,586)
------------------------------------------------------------------------------------------
Class C (1,520,780) (5,906,404)
==========================================================================================
Net increase (decrease) in net assets resulting from
share transactions (22,957,401) (58,867,061)
==========================================================================================
Net increase (decrease) in net assets 55,229,341 (7,894,890)
==========================================================================================
NET ASSETS:
Beginning of period 759,873,816 767,768,706
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(4,067,842) and $(21,786) for 2004 and
2003, respectively) $815,103,157 $759,873,816
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-61
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Health Care Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
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
FS-62
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.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. 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.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.975% on the first $500 million of the Fund's average daily net assets, plus 0.95% on the next $500 million of the Fund's average daily net assets, plus 0.925% on the next $500 million of the Fund's average daily net assets, plus 0.90% on the Fund's average daily net assets in excess of $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 on investments by the Fund in such affiliated money market funds (excluding investments made in affiliated money market funds with cash collateral from securities loaned by the Fund). For the six months ended April 30, 2004, AIM waived fees of $9,062.
FS-63
NOTE 2-- ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES -- (CONTINUED)
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 six months ended April 30, 2004, AIM was paid $103,409 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the six months ended April 30, 2004, AISI retained $528,628 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 and Class C 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, Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.50% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 six months ended April 30, 2004, the Class A, Class B and Class C shares paid $1,440,095, $952,187 and $231,245, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $82,629 in front-end sales commissions from the sale of Class A shares and $2,619, $2,973 and $2,008 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
FS-64
NOTE 3--INVESTMENTS IN AFFILIATES
INVESTMENTS IN AFFILIATED MONEY MARKET FUNDS:
The Fund is permitted, pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), to invest daily available cash balances and cash collateral from securities lending transactions in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash and/or cash collateral received from securities lending transactions. The tables below show the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 25,532,691 $ 97,520,477 $(112,192,345) $ -- $ 10,860,823 $243,330 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 25,532,691 97,520,477 (112,192,345) -- 10,860,823 239,733 --
====================================================================================================================================
Subtotal $ 51,065,382 $195,040,954 $(224,384,690) $ -- $ 21,721,646 $483,063 $ --
====================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 10/31/03 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME* GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 54,777,891 $117,834,158 $(111,593,073) $ -- $ 61,018,976 $ 40,905 $ --
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 54,777,890 117,834,159 (111,593,073) -- 61,018,976 40,905 --
====================================================================================================================================
Subtotal $109,555,781 $235,668,317 $(223,186,146) $ -- $122,037,952 $ 81,810 $ --
====================================================================================================================================
|
* Dividend income is net of fees paid to security lending counterparties of $354,642.
INVESTMENTS IN OTHER AFFILIATES:
The Investment Company Act of 1940 defines affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The Fund has not owned enough the outstanding voting securities of the issuer to have control (as defined in the Investment Company Act of 1940) of that issuer. The following is a summary of the transactions with affiliates for the year ended April 30, 2004.
UNREALIZED
MARKET VALUE PURCHASE PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
10/31/2003 AT COST FROM SALES (DEPRECIATION) 04/30/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
ATS Medical
Inc. $ 1,223,220 $ -- $ (694,484) $ 7,121,264 $ 7,650,000 $ -- $494,098
------------------------------------------------------------------------------------------------------------------------------------
HMS Holdings
Corp. 2,479,000 -- -- 7,758,500 10,237,500 -- --
====================================================================================================================================
Subtotal $ 3,702,220 $ -- $ (694,484) $14,879,764 $ 17,887,500 $ -- $494,098
====================================================================================================================================
Total $164,323,383 $430,709,271 $(448,265,320) $14,879,764 $161,647,098 $564,873 $494,098
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
FS-65
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $5,922 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $5,922.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $3,622 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--PORTFOLIO SECURITIES LOANED
The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds. 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, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. 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. The Fund could also experience delays and costs in gaining access to the collateral. The Fund bears the risk of any deficiency in the amount of the collateral available for return to the borrower due to a loss on the collateral invested.
At April 30, 2004, securities with an aggregate value of $86,694,543 were on loan to brokers. The loans were secured by cash collateral of $122,037,952 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended April 30, 2004, the Fund received dividends on cash collateral net of fees paid to counterparties of $81,810 for securities lending transactions.
NOTE 8--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------
Beginning of period -- $ --
------------------------------------------------------------
Written 22,350 3,555,808
------------------------------------------------------------
Closed (15,000) (2,394,911)
------------------------------------------------------------
Exercised (6,243) (1,117,763)
------------------------------------------------------------
Expired (1,107) (43,134)
============================================================
End of period -- $ --
____________________________________________________________
============================================================
|
FS-66
NOTE 9--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
The Fund has a capital loss carryforward for tax purposes as of October 31, 2003 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------
October 31, 2010 $1,373,462
=========================================================
Total capital loss carryforward $1,373,462
_________________________________________________________
=========================================================
* Any capital loss carryforward listed is reduced for
limitations, if any, to the extent required by the
Internal Revenue Code.
|
NOTE 10--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended April 30, 2004 was $246,997,916 and $215,665,849, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $116,686,419
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (12,262,082)
===========================================================
Net unrealized appreciation of investment
securities $104,424,337
___________________________________________________________
===========================================================
Cost of investments for tax purposes is $833,601,289.
|
NOTE 11--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
-----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,872,941 $ 49,456,719 3,926,329 $ 86,888,575
-----------------------------------------------------------------------------------------------------------------------
Class B 587,571 14,178,801 1,509,164 30,779,326
-----------------------------------------------------------------------------------------------------------------------
Class C 240,744 5,820,171 408,103 8,332,961
=======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 263,189 7,027,167 572,274 12,498,133
-----------------------------------------------------------------------------------------------------------------------
Class B (287,322) (7,027,167) (622,092) (12,498,133)
=======================================================================================================================
Reacquired:
Class A (2,554,485) (67,180,920) (6,006,816) (133,474,779)
-----------------------------------------------------------------------------------------------------------------------
Class B (741,317) (17,891,221) (1,845,284) (37,153,779)
-----------------------------------------------------------------------------------------------------------------------
Class C (305,293) (7,340,951) (703,065) (14,239,365)
=======================================================================================================================
(923,972) $(22,957,401) (2,761,387) $ (58,867,061)
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
FS-67
NOTE 12--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------
2004 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.09 $ 22.41 $ 29.93 $ 30.12 $ 24.00 $ 20.15
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11)(a) (0.13) (0.29)(a) (0.39)(a) (0.22)(a) (0.19)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.62 1.81 (3.17) 3.44 8.62 4.04
============================================================================================================================
Total from investment operations 2.51 1.68 (3.46) 3.05 8.40 3.85
============================================================================================================================
Less distributions from net realized gains -- -- (4.06) (3.24) (2.28) --
============================================================================================================================
Net asset value, end of period $ 26.60 $ 24.09 $ 22.41 $ 29.93 $ 30.12 $ 24.00
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 10.42% 7.50% (13.76)% 10.85% 38.49% 19.11%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $581,616 $536,746 $533,216 $588,072 $460,445 $357,747
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 1.91%(c) 1.94% 1.86% 1.75% 1.73% 1.82%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.85)%(c) (0.56)% (1.10)% (1.28)% (0.85)% (0.81)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 30% 99% 153% 207% 242% 123%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$579,202,771.
(d) Not annualized for periods less than one year.
CLASS B
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ------------------------------------------------------------
2004 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.09 $ 20.66 $ 28.03 $ 28.53 $ 22.96 $ 19.37
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16)(a) (0.23) (0.38)(a) (0.51)(a) (0.34)(a) (0.30)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.41 1.66 (2.93) 3.25 8.19 3.89
============================================================================================================================
Total from investment operations 2.25 1.43 (3.31) 2.74 7.85 3.59
============================================================================================================================
Less distributions from net realized gains -- -- (4.06) (3.24) (2.28) --
============================================================================================================================
Net asset value, end of period $ 24.34 $ 22.09 $ 20.66 $ 28.03 $ 28.53 $ 22.96
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 10.18% 6.92% (14.21)% 10.32% 37.78% 18.53%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $187,159 $179,646 $187,793 $219,036 $144,861 $102,916
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets 2.41%(c) 2.44% 2.36% 2.25% 2.23% 2.33%
============================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.35)%(c) (1.06)% (1.60)% (1.78)% (1.35)% (1.32)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(d) 30% 99% 153% 207% 242% 123%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$191,483,776.
(d) Not annualized for periods less than one year.
FS-68
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-----------------------------------------------------------------------------------
MARCH 1, 1999
SIX MONTHS (DATE SALES
ENDED YEAR ENDED OCTOBER 31, COMMENCED) TO
APRIL 30, ---------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 22.11 $ 20.67 $ 28.03 $ 28.53 $ 22.96 $22.50
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16)(a) (0.23) (0.38)(a) (0.51)(a) (0.34)(a) (0.21)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.40 1.67 (2.92) 3.25 8.19 0.67
=================================================================================================================================
Total from investment operations 2.24 1.44 (3.30) 2.74 7.85 0.46
=================================================================================================================================
Less distributions from net realized gains -- -- (4.06) (3.24) (2.28) --
=================================================================================================================================
Net asset value, end of period $ 24.35 $ 22.11 $ 20.67 $ 28.03 $ 28.53 $22.96
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.13% 6.97% (14.18)% 10.32% 37.77% 2.04%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,328 $43,482 $46,759 $36,366 $12,339 $1,278
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.41%(c) 2.44% 2.36% 2.25% 2.23% 2.33%(d)
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.35)%(c) (1.06)% (1.60)% (1.78)% (1.35)% (1.32)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 30% 99% 153% 207% 242% 123%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$46,503,137.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the
FS-69
NOTE 13--LEGAL PROCEEDINGS (CONTINUED)
Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $41,354 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale.
FS-70
NOTE 13--LEGAL PROCEEDINGS (CONTINUED)
Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-71
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-93.23%
AEROSPACE & DEFENSE-2.42%
DRS Technologies, Inc.(a) 18,000 $ 508,500
----------------------------------------------------------------------
Engineered Support Systems, Inc. 9,650 469,280
----------------------------------------------------------------------
Northrop Grumman Corp. 5,100 506,175
======================================================================
1,483,955
======================================================================
AIR FREIGHT & LOGISTICS-2.10%
Hub Group, Inc.-Class A(a) 21,800 752,100
----------------------------------------------------------------------
Ryder System, Inc. 14,700 540,813
======================================================================
1,292,913
======================================================================
ALTERNATIVE CARRIERS-0.91%
Ptek Holdings, Inc.(a) 55,100 560,367
======================================================================
APPAREL RETAIL-8.06%
Aeropostale, Inc.(a) 24,900 547,551
----------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 13,500 547,155
----------------------------------------------------------------------
Chico's FAS, Inc.(a) 15,000 610,950
----------------------------------------------------------------------
Children's Place Retail Stores, Inc. (The)(a) 21,200 558,408
----------------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 16,800 563,304
----------------------------------------------------------------------
Foot Locker, Inc. 19,200 460,800
----------------------------------------------------------------------
Goody's Family Clothing, Inc. 42,700 533,323
----------------------------------------------------------------------
Guess?, Inc.(a) 35,200 548,064
----------------------------------------------------------------------
Urban Outfitters, Inc.(a) 12,600 581,742
======================================================================
4,951,297
======================================================================
ASSET MANAGEMENT & CUSTODY BANKS-3.27%
American Capital Strategies, Ltd. 19,000 498,750
----------------------------------------------------------------------
Franklin Resources, Inc. 9,400 515,402
----------------------------------------------------------------------
Investors Financial Services Corp. 12,100 470,327
----------------------------------------------------------------------
T. Rowe Price Group Inc. 10,200 523,056
======================================================================
2,007,535
======================================================================
CATALOG RETAIL-0.61%
Insight Enterprises, Inc.(a) 22,400 374,976
======================================================================
COMMUNICATIONS EQUIPMENT-5.50%
Anaren, Inc.(a) 33,500 494,125
----------------------------------------------------------------------
Andrew Corp.(a) 35,400 600,030
----------------------------------------------------------------------
Brocade Communications Systems, Inc.(a) 85,700 458,495
----------------------------------------------------------------------
Carrier Access Corp.(a) 44,600 474,544
----------------------------------------------------------------------
Comtech Telecommunications Corp.(a) 28,300 457,894
----------------------------------------------------------------------
Comverse Technology, Inc.(a) 28,900 472,804
----------------------------------------------------------------------
ViaSat, Inc.(a) 19,300 424,214
======================================================================
3,382,106
======================================================================
|
----------------------------------------------------------------------
MARKET
SHARES VALUE
COMPUTER STORAGE & PERIPHERALS-1.45%
Applied Films Corp.(a) 20,600 $ 490,280
----------------------------------------------------------------------
Komag, Inc.(a) 31,700 402,907
======================================================================
893,187
======================================================================
CONSTRUCTION & ENGINEERING-0.83%
Washington Group International, Inc.(a) 14,200 512,904
======================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.76%
Joy Global Inc. 17,700 464,625
======================================================================
CONSTRUCTION MATERIALS-0.80%
Florida Rock Industries, Inc. 12,300 489,417
======================================================================
CONSUMER FINANCE-0.77%
CompuCredit Corp.(a) 28,500 472,245
======================================================================
DEPARTMENT STORES-0.87%
Nordstrom, Inc. 15,000 534,450
======================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.92%
University of Phoenix Online(a) 6,500 565,890
======================================================================
DIVERSIFIED METALS & MINING-2.14%
Inco Ltd. (Canada)(a) 17,000 488,750
----------------------------------------------------------------------
Phelps Dodge Corp.(a) 7,500 493,725
----------------------------------------------------------------------
Southern Peru Copper Corp. 11,400 330,942
======================================================================
1,313,417
======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.07%
Keithley Instruments, Inc. 24,200 504,570
----------------------------------------------------------------------
PerkinElmer, Inc. 24,400 469,700
----------------------------------------------------------------------
Rogers Corp.(a) 9,700 579,090
----------------------------------------------------------------------
Zygo Corp.(a) 30,000 330,600
======================================================================
1,883,960
======================================================================
ELECTRONIC MANUFACTURING SERVICES-2.50%
Flextronics International Ltd. (Singapore)(a) 34,500 555,450
----------------------------------------------------------------------
Sanmina-SCI Corp.(a) 50,000 501,000
----------------------------------------------------------------------
TTM Technologies, Inc.(a) 43,300 481,063
======================================================================
1,537,513
======================================================================
EMPLOYMENT SERVICES-1.49%
Administaff, Inc.(a) 30,000 525,000
----------------------------------------------------------------------
|
FS-72
MARKET
SHARES VALUE
----------------------------------------------------------------------
EMPLOYMENT SERVICES-(CONTINUED)
Gevity HR, Inc. 17,700 $ 389,931
======================================================================
914,931
======================================================================
FOOTWEAR-0.98%
Deckers Outdoor Corp.(a) 22,500 602,775
======================================================================
FOREST PRODUCTS-0.82%
Louisiana-Pacific Corp. 21,300 502,467
======================================================================
HEALTH CARE FACILITIES-0.82%
Genesis HealthCare Corp.(a) 21,500 502,885
======================================================================
HOME FURNISHINGS-0.77%
Furniture Brands International, Inc. 16,900 475,566
======================================================================
HOMEBUILDING-5.29%
Beazer Homes USA, Inc. 5,800 571,010
----------------------------------------------------------------------
Centex Corp. 11,700 561,015
----------------------------------------------------------------------
D.R. Horton, Inc. 16,100 463,680
----------------------------------------------------------------------
KB HOME 7,800 537,654
----------------------------------------------------------------------
Pulte Homes, Inc. 11,800 580,206
----------------------------------------------------------------------
Standard Pacific Corp. 10,600 534,664
======================================================================
3,248,229
======================================================================
HOUSEWARES & SPECIALTIES-0.85%
Jarden Corp.(a) 14,100 524,520
======================================================================
INDUSTRIAL MACHINERY-2.94%
Ceradyne, Inc.(a) 21,600 616,464
----------------------------------------------------------------------
Middleby Corp. (The)(a) 12,900 653,372
----------------------------------------------------------------------
TimKen Co. (The) 24,400 538,264
======================================================================
1,808,100
======================================================================
INTEGRATED OIL & GAS-0.60%
PetroChina Co. Ltd.-ADR (China) 8,600 369,800
======================================================================
INTERNET SOFTWARE & SERVICES-3.02%
Equinex, Inc.(a) 16,300 479,057
----------------------------------------------------------------------
Open Text Corp. (Canada)(a) 17,800 483,626
----------------------------------------------------------------------
SonicWALL, Inc.(a) 48,100 344,396
----------------------------------------------------------------------
ValueClick, Inc.(a) 53,100 550,116
======================================================================
1,857,195
======================================================================
INVESTMENT BANKING & BROKERAGE-4.31%
Ameritrade Holding Corp.(a) 40,400 494,496
----------------------------------------------------------------------
Knight Trading Group, Inc.(a) 47,700 554,274
----------------------------------------------------------------------
Lehman Brothers Holdings Inc. 7,000 513,800
----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 9,900 536,877
----------------------------------------------------------------------
Morgan Stanley 10,700 549,873
======================================================================
2,649,320
======================================================================
|
----------------------------------------------------------------------
MARKET
SHARES VALUE
IT CONSULTING & OTHER SERVICES-1.82%
Cognizant Technology Solutions Corp.(a) 12,100 $ 523,446
----------------------------------------------------------------------
Sapient Corp.(a) 106,000 593,600
======================================================================
1,117,046
======================================================================
LEISURE PRODUCTS-0.87%
Brunswick Corp. 13,000 534,430
======================================================================
MANAGED HEALTH CARE-0.73%
Aetna Inc. 5,400 446,850
======================================================================
MARINE-0.85%
General Maritime Corp.(a)(Republic of
Marshall Islands) 26,000 522,340
======================================================================
METAL & GLASS CONTAINERS-0.80%
Crown Holdings, Inc.(a) 58,300 492,052
======================================================================
OIL & GAS EXPLORATION & PRODUCTION-2.83%
Cimarex Energy Co.(a) 20,000 551,800
----------------------------------------------------------------------
Edge Petroleum Corp.(a) 43,600 634,380
----------------------------------------------------------------------
Spinnaker Exploration Co.(a) 15,500 552,885
======================================================================
1,739,065
======================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-3.02%
Giant Industries, Inc.(a) 27,300 502,866
----------------------------------------------------------------------
OMI Corp. (Republic of Marshall Islands) 46,300 466,241
----------------------------------------------------------------------
Overseas Shipholding Group, Inc. 14,100 462,057
----------------------------------------------------------------------
Tsakos Energy Navigation Ltd. (Bermuda) 17,400 422,124
======================================================================
1,853,288
======================================================================
PHARMACEUTICALS-0.93%
First Horizon Pharmaceutical Corp.(a) 36,800 570,768
======================================================================
PROPERTY & CASUALTY INSURANCE-1.76%
Allstate Corp. (The) 11,600 532,440
----------------------------------------------------------------------
First American Financial Corp. 20,300 550,536
======================================================================
1,082,976
======================================================================
REAL ESTATE-2.44%
Impac Mortgage Holdings, Inc. 27,300 513,513
----------------------------------------------------------------------
Novastar Financial, Inc. 15,800 512,868
----------------------------------------------------------------------
Redwood Trust, Inc. 10,900 473,605
======================================================================
1,499,986
======================================================================
RESTAURANTS-0.85%
Checkers Drive-In Restaurants, Inc.(a) 49,700 524,832
======================================================================
SEMICONDUCTOR EQUIPMENT-5.48%
Axcelis Technologies, Inc.(a) 58,800 617,988
----------------------------------------------------------------------
Credence Systems Corp.(a) 44,000 490,160
----------------------------------------------------------------------
Cymer, Inc.(a) 14,700 470,106
----------------------------------------------------------------------
|
FS-73
MARKET
SHARES VALUE
----------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-(CONTINUED)
Lam Research Corp.(a) 22,600 $ 500,364
----------------------------------------------------------------------
LTX Corp.(a) 39,300 429,549
----------------------------------------------------------------------
MKS Instruments, Inc.(a) 23,900 459,358
----------------------------------------------------------------------
Semitool, Inc.(a) 36,500 401,135
======================================================================
3,368,660
======================================================================
SEMICONDUCTORS-3.64%
Analog Devices, Inc. 9,700 413,220
----------------------------------------------------------------------
Conexant Systems, Inc.(a) 78,100 339,735
----------------------------------------------------------------------
ESS Technology, Inc.(a) 47,300 507,056
----------------------------------------------------------------------
Fairchild Semiconductor International,
Inc.(a) 23,500 457,545
----------------------------------------------------------------------
OmniVision Technologies, Inc.(a) 23,200 517,406
======================================================================
2,234,962
======================================================================
SPECIALTY STORES-3.47%
Jo-Ann Stores, Inc.(a) 19,200 542,784
----------------------------------------------------------------------
Movie Gallery, Inc. 28,600 555,412
----------------------------------------------------------------------
Sharper Image Corp.(a) 14,200 433,952
----------------------------------------------------------------------
Sonic Automotive, Inc. 24,100 600,090
======================================================================
2,132,238
======================================================================
STEEL-1.57%
Schnitzer Steel Industries, Inc.-Class A 17,200 451,844
----------------------------------------------------------------------
|
----------------------------------------------------------------------
MARKET
SHARES VALUE
STEEL-(CONTINUED)
Steel Dynamics, Inc.(a) 21,400 $ 515,098
======================================================================
966,942
======================================================================
TECHNOLOGY DISTRIBUTORS-0.79%
CDW Corp. 7,800 487,422
======================================================================
THRIFTS & MORTGAGE FINANCE-0.81%
New Century Financial Corp. 11,700 496,431
======================================================================
TIRES & RUBBER-0.83%
Bandag, Inc. 11,700 509,535
======================================================================
TRUCKING-0.87%
AMERCO(a) 19,000 534,470
======================================================================
Total Common Stocks & Other Equity
Interests (Cost $60,481,961) 57,290,838
======================================================================
MONEY MARKET FUNDS-2.81%
Liquid Assets Portfolio-Institutional
Class(b) 863,484 863,484
----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(b) 863,484 863,484
======================================================================
Total Money Market Funds (Cost
$1,726,968) 1,726,968
----------------------------------------------------------------------
TOTAL INVESTMENTS-96.04% (Cost $62,208,929) 59,017,806
======================================================================
OTHER ASSETS LESS LIABILITIES-3.96% 2,435,839
======================================================================
NET ASSETS-100.00% $61,453,645
______________________________________________________________________
======================================================================
|
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. See Note 3.
See accompanying notes which are an integral part of the financial statements.
FS-74
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$60,481,961) $57,290,838
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $1,726,968) 1,726,968
===========================================================
Total investments (cost $62,208,929) 59,017,806
===========================================================
Receivables for:
Investments sold 2,449,556
-----------------------------------------------------------
Fund shares sold 186,066
-----------------------------------------------------------
Dividends 14,349
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 4,100
-----------------------------------------------------------
Other assets 29,076
===========================================================
Total assets 61,700,953
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 172,638
-----------------------------------------------------------
Deferred compensation and retirement plans 4,100
-----------------------------------------------------------
Accrued distribution fees 28,681
-----------------------------------------------------------
Accrued trustees' fees 818
-----------------------------------------------------------
Accrued transfer agent fees 15,609
-----------------------------------------------------------
Accrued operating expenses 25,462
===========================================================
Total liabilities 247,308
===========================================================
Net assets applicable to shares outstanding $61,453,645
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $62,996,011
-----------------------------------------------------------
Undistributed net investment income (loss) (497,343)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 2,146,100
-----------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (3,191,123)
===========================================================
$61,453,645
___________________________________________________________
===========================================================
NET ASSETS:
Class A $44,764,632
___________________________________________________________
===========================================================
Class B $10,418,511
___________________________________________________________
===========================================================
Class C $ 6,270,502
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 3,586,319
___________________________________________________________
===========================================================
Class B 843,540
___________________________________________________________
===========================================================
Class C 507,129
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 12.48
-----------------------------------------------------------
Offering price per share:
(Net asset value of $12.48 divided by
94.50%) $ 13.21
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 12.35
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 12.36
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-75
STATEMENT OF OPERATIONS
For the six months ended April 30, 2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $233) $ 65,044
-------------------------------------------------------------------------
Dividends from affiliated money market funds 13,296
=========================================================================
Total investment income 78,340
=========================================================================
EXPENSES:
Advisory fees 252,574
-------------------------------------------------------------------------
Administrative services fees 24,863
-------------------------------------------------------------------------
Custodian fees 14,550
-------------------------------------------------------------------------
Distribution fees:
Class A 76,282
-------------------------------------------------------------------------
Class B 49,658
-------------------------------------------------------------------------
Class C 29,539
-------------------------------------------------------------------------
Transfer agent fees 53,016
-------------------------------------------------------------------------
Trustees' fees 6,151
-------------------------------------------------------------------------
Professional fees 35,705
-------------------------------------------------------------------------
Other 31,537
=========================================================================
Total expenses 573,875
=========================================================================
Less: Fees waived and expense offset arrangements (1,051)
=========================================================================
Net expenses 572,824
=========================================================================
Net investment income (loss) (494,484)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities 2,308,458
=========================================================================
Change in net unrealized appreciation (depreciation) of
investment securities (8,020,001)
=========================================================================
Net gain (loss) from investment securities (5,711,543)
=========================================================================
Net increase (decrease) in net assets resulting from
operations $(6,206,027)
_________________________________________________________________________
=========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-76
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 2004 and the year ended October 31, 2003
(Unaudited)
APRIL 30, OCTOBER 31,
2004 2003
----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (494,484) $ (189,529)
----------------------------------------------------------------------------------------
Net realized gain from investment securities and future
contracts 2,308,458 53,689
----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (8,020,001) 4,828,878
========================================================================================
Net increase (decrease) in net assets resulting from
operations (6,206,027) 4,693,038
========================================================================================
Distributions to shareholders from net realized gains:
Class A (28,055) --
----------------------------------------------------------------------------------------
Class B (5,972) --
----------------------------------------------------------------------------------------
Class C (3,533) --
========================================================================================
Decrease in net assets resulting from distributions (37,560) --
========================================================================================
Share transactions-net:
Class A 16,828,353 28,645,977
----------------------------------------------------------------------------------------
Class B 5,044,388 5,959,059
----------------------------------------------------------------------------------------
Class C 3,391,337 3,135,080
========================================================================================
Net increase in net assets resulting from share
transactions 25,264,078 37,740,116
========================================================================================
Net increase in net assets 19,020,491 42,433,154
========================================================================================
NET ASSETS:
Beginning of period 42,433,154 --
========================================================================================
End of period (including undistributed net investment
income (loss) of $(497,343) and $(2,859) for 2004 and
2003, respectively) $61,453,645 $42,433,154
________________________________________________________________________________________
========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-77
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Libra Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to provide long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
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
FS-78
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
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. If the Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts.
F. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund and which are directly attributable to that class are charged to the operations of such class. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 1.80%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 1.80% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year. 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 on
investments by the Fund in such affiliated money market funds. For the six
months ended April 30, 2004, AIM waived fees of $239.
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 six months ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. During the six months ended April 30, 2004, AISI retained $22,391 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 and Class C 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, Class B and Class C shares (collectively the "Plans").
FS-79
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES (CONTINUED)
The Fund, pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the average daily net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B or Class C shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 six months ended April 30, 2004, the Class A, Class B and Class C shares paid $76,282, $49,658 and $29,539, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended April 30, 2004, AIM Distributors advised the Fund that it retained $47,648 in front-end sales commissions from the sale of Class A shares and $694, $24, and $2,522 from Class A, Class B and Class C shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund is permitted, pursuant to an exemptive order the Securities and Exchange Commission ("SEC") and approved procedures by the Board of Trustees, to invest daily available cash balances in affiliated money market funds. The Fund and the money market funds below have the same investment advisor and therefore, are considered to be affiliated. Each day the prior day's balance invested in the affiliated money market fund is redeemed in full and a new purchase amount is submitted to invest the current day's available cash. The table below shows the transactions in and earnings from investments in affiliated money market funds for the period ended April 30, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
MARKET PROCEEDS UNREALIZED MARKET REALIZED
VALUE PURCHASES FROM APPRECIATION VALUE DIVIDEND GAIN
FUND 10/31/03 AT COST SALES (DEPRECIATION) 04/30/04 INCOME (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $1,671,878 $23,089,392 $(23,897,786) $ -- $ 863,484 $ 6,759 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 1,671,878 23,089,392 (23,897,786) -- 863,484 6,537 --
==================================================================================================================================
$3,343,756 $46,178,784 $(47,795,572) $ -- $1,726,968 $13,296 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the six months ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $396 and reductions in custodian fees of $416 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $812.
NOTE 5--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the six months ended April 30, 2004, the Fund paid legal fees of $2,316 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 6--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the six months ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
FS-80
NOTE 6--BORROWINGS (CONTINUED)
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforward) under income tax regulations. The tax character of
distributions paid during the year and the tax components of net assets will be
updated at the Fund's fiscal year-end.
NOTE 7--TAX INFORMATION (CONTINUED)
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the six months ended April 30, 2004 was $131,233,096 and $109,253,728, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
-----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 2,008,298
-----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,199,421)
===========================================================
Net unrealized appreciation (depreciation) of
investment securities $(3,191,123)
___________________________________________________________
===========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 9--SHARE INFORMATION
The Fund currently offers three different classes of shares: Class A shares, Class B shares and Class C shares. Class A shares are sold with a front-end sales charge. Class B shares and Class C shares are sold with CDSC. Under some circumstances, Class A shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,737,223 $24,169,307 2,569,911 $30,729,918
------------------------------------------------------------------------------------------------------------------
Class B 553,525 7,621,352 541,811 6,655,534
------------------------------------------------------------------------------------------------------------------
Class C 344,738 4,714,539 302,832 3,644,450
==================================================================================================================
Issued as reinvestment of dividends:
Class A 1,911 25,584 -- --
------------------------------------------------------------------------------------------------------------------
Class B 434 5,762 -- --
------------------------------------------------------------------------------------------------------------------
Class C 233 3,091 -- --
==================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 22,067 307,505 4,523 57,488
------------------------------------------------------------------------------------------------------------------
Class B (22,274) (307,505) (4,552) (57,488)
==================================================================================================================
Reacquired:
Class A (559,692) (7,674,043) (189,624) (2,141,429)
------------------------------------------------------------------------------------------------------------------
Class B (171,280) (2,275,221) (54,124) (638,987)
------------------------------------------------------------------------------------------------------------------
Class C (98,614) (1,326,293) (42,060) (509,370)
==================================================================================================================
1,808,271 $25,264,078 3,128,717 $37,740,116
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-81
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.59 $ 10.00
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.18)(a)
------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (1.00) 3.77
==========================================================================================
Total from investment operations (1.10) 3.59
==========================================================================================
Less distributions from net realized gains (0.01) --
==========================================================================================
Net asset value, end of period $ 12.48 $ 13.59
__________________________________________________________________________________________
==========================================================================================
Total return(b) (8.10)% 35.90%
__________________________________________________________________________________________
==========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,765 $32,398
__________________________________________________________________________________________
==========================================================================================
Ratio of expenses to average net assets 1.76%(c) 1.80%(d)
==========================================================================================
Ratio of net investment income (loss) to average net assets (1.50)%(c) (1.54)%
__________________________________________________________________________________________
==========================================================================================
Portfolio turnover rate(e) 195% 325%
__________________________________________________________________________________________
==========================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$43,829,302.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 3.24%.
(e) Not annualized for periods less than one year.
CLASS B
----------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.48 $10.00
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.26)(a)
------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.97) 3.74
==========================================================================================
Total from investment operations (1.12) 3.48
==========================================================================================
Less distributions from net realized gains (0.01) --
==========================================================================================
Net asset value, end of period $ 12.35 $13.48
__________________________________________________________________________________________
==========================================================================================
Total return(b) (8.31)% 34.80%
__________________________________________________________________________________________
==========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $10,419 $6,515
__________________________________________________________________________________________
==========================================================================================
Ratio of expenses to average net assets 2.41%(c) 2.45%(d)
==========================================================================================
Ratio of net investment income (loss) to average net assets (2.15)%(c) (2.19)%
__________________________________________________________________________________________
==========================================================================================
Portfolio turnover rate(e) 195% 325%
__________________________________________________________________________________________
==========================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$9,986,138.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 3.89%.
(e) Not annualized for periods less than one year.
FS-82
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
------------------------------------------------------------------------------------------
Net asset value, beginning of period $13.50 $10.00
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.15)(a) (0.26)(a)
------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.98) 3.76
==========================================================================================
Total from investment operations (1.13) 3.50
==========================================================================================
Less distributions from net realized gains (0.01) --
==========================================================================================
Net asset value, end of period $12.36 $13.50
__________________________________________________________________________________________
==========================================================================================
Total return(b) (8.38)% 35.00%
__________________________________________________________________________________________
==========================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,271 $3,520
__________________________________________________________________________________________
==========================================================================================
Ratio of expenses to average net assets 2.41%(c) 2.45%(d)
==========================================================================================
Ratio of net investment income (loss) to average net assets (2.15)%(c) (2.19)%
__________________________________________________________________________________________
==========================================================================================
Portfolio turnover rate(e) 195% 325%
__________________________________________________________________________________________
==========================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$5,940,262.
(d) After fee waivers. Ratio of expenses to average net assets prior to fee
waivers was 3.89%.
(e) Not annualized for periods less than one year.
NOTE 11--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also
FS-83
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $18,029 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery,
FS-84
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-85
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS-61.79%
APPAREL RETAIL-4.64%
Ross Stores, Inc. 13,000 $ 396,500
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.56%
Liz Claiborne, Inc. 11,100 389,610
======================================================================
AUTO PARTS & EQUIPMENT-3.47%
Superior Industries International, Inc. 8,700 296,496
======================================================================
CASINOS & GAMING-3.67%
Harrah's Entertainment, Inc. 5,900 313,762
======================================================================
COMMERCIAL PRINTING-1.55%
Donnelley (R.R.) & Sons Co. 4,500 132,390
======================================================================
EMPLOYMENT SERVICES-3.90%
Manpower Inc. 7,100 332,990
======================================================================
HEALTH CARE EQUIPMENT-11.05%
Apogent Technologies Inc.(a) 8,200 265,844
----------------------------------------------------------------------
Cytyc Corp.(a) 12,900 276,060
----------------------------------------------------------------------
DENTSPLY International Inc. 8,300 402,218
======================================================================
944,122
======================================================================
INSURANCE BROKERS-4.18%
Arthur J. Gallagher & Co. 11,100 357,753
======================================================================
LEISURE PRODUCTS-4.22%
Polaris Industries Inc. 8,400 360,360
======================================================================
MANAGED HEALTH CARE-4.96%
WellPoint Health Networks Inc.(a) 3,800 424,422
======================================================================
REGIONAL BANKS-9.63%
Charter One Financial, Inc. 12,100 403,777
----------------------------------------------------------------------
North Fork Bancorp., Inc. 11,300 419,456
======================================================================
823,233
======================================================================
STEEL-2.64%
Nucor Corp. 3,800 225,720
======================================================================
THRIFTS & MORTGAGE FINANCE-3.32%
Radian Group Inc. 6,100 283,711
======================================================================
Total Domestic Common Stocks (Cost
$5,209,391) 5,281,069
======================================================================
|
----------------------------------------------------------------------
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-22.08%
AUSTRALIA-1.56%
Cochlear Ltd. (Health Care Equipment) 9,300 $ 133,569
======================================================================
CANADA-1.39%
Molson Inc.-Class A (Brewers) 5,200 118,820
======================================================================
FRANCE-2.66%
Lagardere S.C.A. (Publishing)(b) 1,800 107,748
----------------------------------------------------------------------
Zodiac S.A. (Aerospace & Defense)(b) 4,000 119,482
======================================================================
227,230
======================================================================
GERMANY-3.56%
Hugo Boss A.G.-Pfd. (Apparel, Accessories &
Luxury Goods)(b) 6,900 152,269
----------------------------------------------------------------------
Medion A.G. (Distributors)(b) 3,600 152,426
======================================================================
304,695
======================================================================
IRELAND-3.30%
Kingspan Group PLC (Building Products)(b) 22,900 121,742
----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 4,800 159,936
======================================================================
281,678
======================================================================
JAPAN-1.21%
Nintendo Co., Ltd. (Home Entertainment
Software) 1,100 103,729
======================================================================
MEXICO-3.19%
Grupo Modelo, S.A. de C.V.-Series C (Brewers) 39,200 97,893
----------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 4,000 174,360
======================================================================
272,253
======================================================================
NETHERLANDS-1.49%
Fugro N.V.-Dutch Ctfs. (Oil & Gas Equipment &
Services)(b) 2,200 126,966
======================================================================
SWEDEN-3.72%
Hoganas A.B.-Class B (Steel)(b) 3,800 91,925
----------------------------------------------------------------------
Munters A.B. (Industrial Machinery)(b) 4,400 105,429
----------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(b) 12,000 120,376
======================================================================
317,730
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $1,872,384) 1,886,670
======================================================================
|
FS-86
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-15.62%
FEDERAL HOME LOAN BANK (FHLMC)-15.62%
Unsec. Disc. Notes,
0.90%, 05/03/04 (Cost $1,334,933)(c) $1,335,000 $1,334,933
======================================================================
TOTAL INVESTMENTS-99.49% (Cost $8,416,708) 8,502,672
======================================================================
OTHER ASSETS LESS LIABILITIES-0.51% 43,841
======================================================================
NET ASSETS-100.00% $8,546,513
______________________________________________________________________
======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Ctfs. - Certificates Disc. - Discounted Pfd. - Preferred Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with procedures established by the Board
of Trustees. The aggregate market value of these securities at 04/30/04 was
$1,098,363 which represented 12.92% of the Fund's total investments. See
Note 1A.
(c) Security traded on a discount basis. The interest rate shown represents the
rate at the time of purchase by the Fund.
See accompanying notes which are an integral part of the financial statements.
FS-87
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost $8,416,708) $8,502,672
-----------------------------------------------------------
Cash 616
-----------------------------------------------------------
Receivables for:
Investments sold 130,342
-----------------------------------------------------------
Fund shares sold 220,846
-----------------------------------------------------------
Dividends 10,401
-----------------------------------------------------------
Foreign currency contracts outstanding 8,388
-----------------------------------------------------------
Amount due from advisor 11,531
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 451
-----------------------------------------------------------
Other assets 47,410
===========================================================
Total assets 8,932,657
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 352,347
-----------------------------------------------------------
Deferred compensation and retirement plans 451
-----------------------------------------------------------
Accrued distribution fees 3,924
-----------------------------------------------------------
Accrued trustees' fees 917
-----------------------------------------------------------
Accrued transfer agent fees 582
-----------------------------------------------------------
Accrued operating expenses 27,923
===========================================================
Total liabilities 386,144
===========================================================
Net assets applicable to shares outstanding $8,546,513
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,452,546
-----------------------------------------------------------
Undistributed net investment income (loss) (9,660)
-----------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 9,359
-----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 94,268
===========================================================
$8,546,513
___________________________________________________________
===========================================================
NET ASSETS:
Class A $4,367,283
___________________________________________________________
===========================================================
Class B $3,057,557
___________________________________________________________
===========================================================
Class C $1,076,671
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 35,002
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 401,243
___________________________________________________________
===========================================================
Class B 281,543
___________________________________________________________
===========================================================
Class C 99,154
___________________________________________________________
===========================================================
Class R 919
___________________________________________________________
===========================================================
Institutional Class 3,217
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.88
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.88 divided by
94.50%) $ 11.51
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.86
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.86
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.88
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.88
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-88
STATEMENT OF OPERATIONS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $817) $ 21,436
----------------------------------------------------------------------
Interest 2,514
======================================================================
Total investment income 23,950
======================================================================
EXPENSES:
Advisory fees 11,662
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 7,127
----------------------------------------------------------------------
Distribution fees:
Class A 2,735
----------------------------------------------------------------------
Class B 4,673
----------------------------------------------------------------------
Class C 2,090
----------------------------------------------------------------------
Transfer agent fees-Class A, B, C and R 1,287
----------------------------------------------------------------------
Trustees' fees 5,939
----------------------------------------------------------------------
Registration and filing fees 9,733
----------------------------------------------------------------------
Reports to shareholders 10,500
----------------------------------------------------------------------
Professional fees 23,891
----------------------------------------------------------------------
Other 2,329
======================================================================
Total expenses 106,829
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (73,219)
======================================================================
Net expenses 33,610
======================================================================
Net investment income (loss) (9,660)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FOREIGN CURRENCY
CONTRACTS:
Net realized gain (loss) from:
Investment securities 12,244
----------------------------------------------------------------------
Foreign currencies (2,885)
======================================================================
9,359
======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 85,964
----------------------------------------------------------------------
Foreign currencies (84)
----------------------------------------------------------------------
Foreign currency contracts 8,388
======================================================================
94,268
======================================================================
Net gain from investment securities, foreign currencies and
foreign currency contracts 103,627
======================================================================
Net increase in net assets resulting from operations $ 93,967
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-89
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
--------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (9,660)
--------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 9,359
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and foreign currency
contracts 94,268
==========================================================================
Net increase in net assets resulting from operations 93,967
==========================================================================
Share transactions-net:
Class A 4,327,447
--------------------------------------------------------------------------
Class B 3,019,825
--------------------------------------------------------------------------
Class C 1,060,271
--------------------------------------------------------------------------
Class R 10,000
--------------------------------------------------------------------------
Institutional Class 35,003
==========================================================================
Net increase in net assets resulting from share
transactions 8,452,546
==========================================================================
Net increase in net assets 8,546,513
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income (loss) of $(9,660)) $8,546,513
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-90
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Endeavor Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
FS-91
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $1
billion of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to
FS-92
be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $11,662 and reimbursed expenses of $61,504. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the period ended April 30, 2004, AISI retained $321 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $2,735, $4,673, $2,090 and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $5,784 in front-end sales commissions from the sale of Class A shares and $0, $768, $0 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $45 and reductions in custodian fees of $8 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $53.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be
FS-93
compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--FOREIGN CURRENCY CONTRACTS
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
-------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ------------------- UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
-------------------------------------------------------------------------------
01/12/05 EUR $ 79,170 $100,000 $ 94,416 $5,584
-------------------------------------------------------------------------------
04/14/05 EUR 416,910 500,000 497,196 2,804
===============================================================================
$496,080 $600,000 $591,612 $8,388
_______________________________________________________________________________
===============================================================================
|
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the period ended April 30, 2004 was $7,549,079 and $479,549, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 208,186
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (122,222)
==========================================================
Net unrealized appreciation of investment
securities $ 85,964
__________________________________________________________
==========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 9--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED)
THROUGH
APRIL 30, 2004
---------------------
SHARES AMOUNT
-----------------------------------------------------------------------------------
Sold:
Class A 409,118 $4,413,682
-----------------------------------------------------------------------------------
Class B 284,153 3,048,687
-----------------------------------------------------------------------------------
Class C 99,154 1,060,271
-----------------------------------------------------------------------------------
Class R* 919 10,000
-----------------------------------------------------------------------------------
Institutional Class* 3,217 35,003
===================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 126 1,394
-----------------------------------------------------------------------------------
Class B (126) (1,394)
===================================================================================
Reacquired:
Class A (8,001) (87,629)
-----------------------------------------------------------------------------------
Class B (2,484) (27,468)
===================================================================================
786,076 $8,452,546
___________________________________________________________________________________
===================================================================================
|
* Class R shares and Institutional Class shares commenced sales on April 30, 2004.
FS-94
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.90
================================================================================
Total from investment operations 0.88
================================================================================
Net asset value, end of period $10.88
________________________________________________________________________________
================================================================================
Total return(b) 8.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,367
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.01%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.03%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (0.36)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,597,929.
(d) Not annualized for periods less than one year.
FS-95
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.91
================================================================================
Total from investment operations 0.86
================================================================================
Net asset value, end of period $10.86
________________________________________________________________________________
================================================================================
Total return(b) 8.60%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,058
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.66%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.68%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.01)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $955,454.
(d) Not annualized for periods less than one year.
FS-96
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.91
================================================================================
Total from investment operations 0.86
================================================================================
Net asset value, end of period $10.86
________________________________________________________________________________
================================================================================
Total return(b) 8.60%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,077
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.66%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.68%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.01)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $427,333.
(d) Not annualized for periods less than one year.
FS-97
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.88
-----------------------------------------------------------------------------
Net investment income --
=============================================================================
Net asset value, end of period $10.88
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets --
=============================================================================
Ratio of net investment income (loss) to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 16%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.88
-----------------------------------------------------------------------------------
Net investment income --
===================================================================================
Net asset value, end of period $10.88
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 35
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
===================================================================================
Ratio of net investment income (loss) to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 16%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for periods less than one year.
NOTE 11--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions
FS-98
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,292 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
FS-99
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-100
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-55.26%
ASSET MANAGEMENT & CUSTODY BANKS-2.52%
State Street Corp. 5,900 $ 287,920
======================================================================
CASINOS & GAMING-2.89%
Harrah's Entertainment, Inc. 6,200 329,716
======================================================================
COMPUTER & ELECTRONICS RETAIL-3.12%
RadioShack Corp. 11,600 356,816
======================================================================
CONSTRUCTION MATERIALS-2.02%
Vulcan Materials Co. 5,000 231,200
======================================================================
CONSUMER FINANCE-3.60%
American Express Co. 8,400 411,180
======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.74%
Sabre Holdings Corp. 8,400 198,156
======================================================================
DIVERSIFIED CHEMICALS-1.91%
Engelhard Corp. 7,500 217,800
======================================================================
ELECTRONIC MANUFACTURING SERVICES-2.12%
Molex Inc.-Class A 9,400 242,144
======================================================================
EMPLOYMENT SERVICES-1.64%
Manpower Inc. 4,000 187,600
======================================================================
HEALTH CARE EQUIPMENT-3.67%
Becton, Dickinson & Co. 8,300 419,565
======================================================================
HEALTH CARE SERVICES-2.74%
IMS Health Inc. 12,400 313,100
======================================================================
HYPERMARKETS & SUPER CENTERS-1.67%
Costco Wholesale Corp.(a) 5,100 190,995
======================================================================
INSURANCE BROKERS-2.25%
Marsh & McLennan Cos., Inc. 5,700 257,070
======================================================================
INTERNET RETAIL-1.67%
IAC/InterActiveCorp.(a) 6,000 191,220
======================================================================
MOVIES & ENTERTAINMENT-2.14%
Walt Disney Co. (The) 10,600 244,118
======================================================================
PROPERTY & CASUALTY INSURANCE-3.91%
Progressive Corp. (The) 5,100 446,352
======================================================================
PUBLISHING-4.54%
Knight-Ridder, Inc. 3,600 278,784
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
PUBLISHING-(CONTINUED)
Meredith Corp. 4,700 $ 239,418
======================================================================
518,202
======================================================================
REAL ESTATE-2.24%
Equity Residential 9,300 255,378
======================================================================
SPECIALIZED FINANCE-2.43%
Moody's Corp. 4,300 277,393
======================================================================
SPECIALTY CHEMICALS-2.33%
Sigma-Aldrich Corp. 4,700 266,208
======================================================================
SYSTEMS SOFTWARE-2.00%
Oracle Corp.(a) 20,400 228,888
======================================================================
TRADING COMPANIES & DISTRIBUTORS-2.11%
W.W. Grainger, Inc. 4,600 241,040
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $6,350,359) 6,312,061
======================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-29.22%
DENMARK-0.61%
Novozymes A.S.-Class B (Specialty
Chemicals)(b) 1,700 69,491
======================================================================
FRANCE-1.44%
Societe BIC S.A. (Office Services &
Supplies)(b) 3,800 164,501
======================================================================
IRELAND-2.92%
Kerry Group PLC-Class A (Packaged Foods &
Meats)(b) 12,000 229,867
----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 3,100 103,292
======================================================================
333,159
======================================================================
ITALY-1.78%
Luxottica Group S.p.A.-ADR (Apparel,
Accessories & Luxury Goods) 12,400 203,360
======================================================================
JAPAN-5.50%
Canon Inc. (Office Electronics) 7,000 366,787
----------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronic
Equipment Manufacturers) 4,000 262,081
======================================================================
628,868
======================================================================
MEXICO-3.70%
Cemex S.A. de C.V.-ADR (Construction
Materials) 10,900 321,005
----------------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C (Brewers) 40,700 101,638
======================================================================
422,643
======================================================================
SINGAPORE-1.51%
Singapore Press Holdings Ltd. (Publishing) 14,000 172,738
======================================================================
|
FS-101
MARKET
SHARES VALUE
----------------------------------------------------------------------
UNITED KINGDOM-11.76%
Compass Group PLC (Restaurants)(b) 21,900 $ 137,561
----------------------------------------------------------------------
Reed Elsevier PLC (Publishing)(b) 45,800 425,304
----------------------------------------------------------------------
Smiths Group PLC (Industrial
Conglomerates)(b) 18,200 225,217
----------------------------------------------------------------------
Tesco PLC (Food Retail)(b) 39,200 172,647
----------------------------------------------------------------------
WPP Group PLC (Advertising)(b) 38,900 382,826
======================================================================
1,343,555
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $3,288,062) 3,338,315
======================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-15.03%
FEDERAL HOME LOAN BANK-15.03%
Unsec. Disc. Notes, 0.90%, 05/03/04 (Cost
$1,716,914)(c) $1,717,000 $ 1,716,914
=======================================================================
TOTAL INVESTMENTS-99.51% (Cost $11,355,335) 11,367,290
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.49% 55,609
=======================================================================
NET ASSETS-100.00% 11,422,899
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Disc. - Discounted Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by
the Board of Trustees. The aggregate market value of these securities at
04/30/04 was $1,807,414 which represented 15.90% of the Fund's total
investments. See Note 1A.
(c) Zero coupon bond issued at a discount. The interest rate shown
represents the yield to maturity at issue.
See accompanying notes which are an integral part of the financial statements.
FS-102
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$11,355,335) $11,367,290
-----------------------------------------------------------
Foreign currencies, at value (cost $0) 18
-----------------------------------------------------------
Receivables for:
Investments sold 94,930
-----------------------------------------------------------
Fund shares sold 247,036
-----------------------------------------------------------
Dividends 18,627
-----------------------------------------------------------
Amount due from advisor 4,234
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 452
-----------------------------------------------------------
Other assets 45,709
===========================================================
Total assets 11,778,296
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 305,256
-----------------------------------------------------------
Deferred compensation and retirement plans 452
-----------------------------------------------------------
Accrued distribution fees 5,249
-----------------------------------------------------------
Accrued trustees' fees 706
-----------------------------------------------------------
Accrued transfer agent fees 2,191
-----------------------------------------------------------
Accrued operating expenses 41,543
===========================================================
Total liabilities 355,397
===========================================================
Net assets applicable to shares outstanding $11,422,899
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $11,414,408
-----------------------------------------------------------
Undistributed net investment income (loss) (22,763)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign currencies 19,174
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 12,080
===========================================================
$11,422,899
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 6,566,311
___________________________________________________________
===========================================================
Class B $ 2,616,389
___________________________________________________________
===========================================================
Class C $ 2,220,199
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 10,000
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 624,736
___________________________________________________________
===========================================================
Class B 249,766
___________________________________________________________
===========================================================
Class C 211,948
___________________________________________________________
===========================================================
Class R 951.5
___________________________________________________________
===========================================================
Institutional Class 951.5
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.51
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.51 divided by
94.50%) $ 11.12
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.48
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.48
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.51
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.51
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-103
STATEMENT OF OPERATIONS
For the period November 4, 2003 (date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,279) $ 36,718
----------------------------------------------------------------------
Interest 4,021
======================================================================
Total investment income 40,739
======================================================================
EXPENSES:
Advisory fees 21,643
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 30,477
----------------------------------------------------------------------
Distribution fees:
Class A 5,567
----------------------------------------------------------------------
Class B 5,135
----------------------------------------------------------------------
Class C 4,422
----------------------------------------------------------------------
Transfer agent fees Class -- A, B, C and R 3,965
----------------------------------------------------------------------
Trustees' fees 5,733
----------------------------------------------------------------------
Registration and filing fees 9,558
----------------------------------------------------------------------
Reports to shareholders 14,419
----------------------------------------------------------------------
Professional fees 24,913
----------------------------------------------------------------------
Other 2,652
======================================================================
Total expenses 153,347
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (89,845)
======================================================================
Net expenses 63,502
======================================================================
Net investment income (loss) (22,763)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 20,329
----------------------------------------------------------------------
Foreign currencies (1,155)
======================================================================
19,174
======================================================================
Change in net unrealized appreciation of:
Investment securities 11,955
----------------------------------------------------------------------
Foreign currencies 125
======================================================================
12,080
======================================================================
Net gain from investment securities and foreign currencies 31,254
======================================================================
Net increase in net assets resulting from operations $ 8,491
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-104
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
---------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,763)
---------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 19,174
---------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 12,080
===========================================================================
Net increase in net assets resulting from operations 8,491
===========================================================================
Share transactions-net:
Class A 6,557,762
---------------------------------------------------------------------------
Class B 2,616,958
---------------------------------------------------------------------------
Class C 2,219,688
---------------------------------------------------------------------------
Class R 10,000
---------------------------------------------------------------------------
Institutional Class 10,000
===========================================================================
Net increase in net assets resulting from share
transactions 11,414,408
===========================================================================
Net increase in net assets 11,422,899
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of period (including undistributed net investment
income (loss) of $(22,763)) $11,422,899
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-105
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds..
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-106
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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. REDEMPTION FEES -- Effective November 24, 2003, the Fund instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
G. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.25%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.25% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
FS-107
credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of fee waivers or reimbursements to the extent the annualized expense ratio does not exceed the limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $21,643 and reimbursed expenses of $68,172. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the period ended April 30, 2004, AISI retained $919 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $5,567, $5,135, $4,422, and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $14,487 in front-end sales commissions from the sale of Class A shares and $0, $100, $100 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AIM Funds Management, AISI, and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $18 and reductions in custodian fees of $12 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $30.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
For the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
FS-108
For the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund for the period ended April 30, 2004 was $10,604,174 and $986,082, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 244,721
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (232,766)
==========================================================
Net unrealized appreciation of investment
securities $ 11,955
__________________________________________________________
==========================================================
Investments have the same costs for tax and financial
statement purposes.
|
NOTE 8--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
--------------------------------------------------------------------------------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30, 2004
------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------------
Sold:
Class A 645,194 $ 6,770,810
--------------------------------------------------------------------------------------
Class B 254,350 2,665,469
--------------------------------------------------------------------------------------
Class C 213,776 2,238,908
--------------------------------------------------------------------------------------
Class R* 951.5 10,000
--------------------------------------------------------------------------------------
Institutional Class* 951.5 10,000
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,194 23,415
--------------------------------------------------------------------------------------
Class B (2,199) (23,415)
======================================================================================
Reacquired**:
Class A (22,652) (236,463)
--------------------------------------------------------------------------------------
Class B (2,385) (25,096)
--------------------------------------------------------------------------------------
Class C (1,828) (19,220)
======================================================================================
1,088,353 $11,414,408
______________________________________________________________________________________
======================================================================================
|
* Class R and Institutional Class shares commenced sales on April 30, 2004. ** Amount is net of redemption fees of $134, $53 and $45 for Class A, Class B and Class C shares for 2004, respectively.
FS-109
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.54
================================================================================
Total from investment operations 0.51
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.51
________________________________________________________________________________
================================================================================
Total return(b) 5.10%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,566
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.25%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 5.78%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (0.65)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,252,018.
(d) Not annualized for periods of less than one year.
FS-110
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
================================================================================
Total from investment operations 0.48
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.48
________________________________________________________________________________
================================================================================
Total return(b) 4.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,616
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,050,035.
(d) Not annualized for periods of less than one year.
FS-111
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
================================================================================
Total from investment operations 0.48
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.48
________________________________________________________________________________
================================================================================
Total return(b) 4.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,220
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $904,143.
(d) Not annualized for periods of less than one year.
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.51
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
=============================================================================
Total from investment operations --
=============================================================================
Net asset value, end of period $10.51
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
-----------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
=============================================================================
Ratio of net investment income to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 22%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
FS-112
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
CLASS
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.51
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income --
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
=============================================================================
Total from investment operations --
=============================================================================
Net asset value, end of period $10.51
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
-----------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
=============================================================================
Ratio of net investment income to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 22%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
NOTE 10--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's
FS-113
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,364 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
FS-114
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-115
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-70.00%
ADVERTISING-3.91%
ADVO, Inc. 5,300 $ 166,420
----------------------------------------------------------------------
Harte-Hanks, Inc. 6,600 158,136
======================================================================
324,556
======================================================================
AGRICULTURAL PRODUCTS-1.34%
Delta & Pine Land Co. 4,600 111,596
======================================================================
AIR FREIGHT & LOGISTICS-2.24%
Dynamex Inc.(a) 14,000 186,060
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.71%
Hampshire Group, Ltd.(a) 13,100 391,061
======================================================================
AUTO PARTS & EQUIPMENT-2.13%
Superior Industries International, Inc. 5,200 177,216
======================================================================
CASINOS & GAMING-2.24%
Argosy Gaming Co.(a) 5,000 185,950
======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.15%
Sabre Holdings Corp. 11,100 261,849
======================================================================
DIVERSIFIED COMMERCIAL SERVICES-8.22%
FTI Consulting, Inc.(a) 20,000 329,000
----------------------------------------------------------------------
Learning Tree International, Inc.(a) 10,400 163,696
----------------------------------------------------------------------
PRG-Schultz International, Inc.(a) 40,500 190,350
======================================================================
683,046
======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.10%
Mettler-Toledo International Inc.(a) 3,900 174,798
======================================================================
HEALTH CARE EQUIPMENT-5.04%
Cytyc Corp.(a) 7,800 166,920
----------------------------------------------------------------------
DENTSPLY International Inc. 5,200 251,992
======================================================================
418,912
======================================================================
HEALTH CARE SUPPLIES-12.14%
Cooper Cos., Inc. (The) 5,900 318,600
----------------------------------------------------------------------
Ocular Sciences, Inc.(a) 7,300 205,130
----------------------------------------------------------------------
Sola International Inc.(a) 14,200 291,384
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
HEALTH CARE SUPPLIES-(CONTINUED)
Sybron Dental Specialties, Inc.(a) 6,600 $ 193,050
======================================================================
1,008,164
======================================================================
LEISURE PRODUCTS-4.93%
Oakley, Inc. 11,000 152,240
----------------------------------------------------------------------
Polaris Industries Inc. 6,000 257,400
======================================================================
409,640
======================================================================
OFFICE SERVICES & SUPPLIES-2.00%
HNI Corp. 4,500 166,545
======================================================================
PAPER PACKAGING-1.77%
Longview Fibre Co. 14,000 146,720
======================================================================
PHARMACEUTICALS-3.42%
Endo Pharmaceuticals Holdings Inc.(a) 11,900 284,053
======================================================================
REAL ESTATE-1.20%
MeriStar Hospitality Corp.(a) 17,200 99,760
======================================================================
REGIONAL BANKS-1.97%
Alabama National BanCorp. 3,200 163,264
======================================================================
RESTAURANTS-2.91%
IHOP Corp. 6,500 241,475
======================================================================
SPECIALTY CHEMICALS-2.69%
MacDermid, Inc. 6,900 223,422
======================================================================
TRUCKING-1.89%
Landstar System, Inc.(a) 3,500 157,360
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $5,791,412) 5,815,447
======================================================================
FOREIGN STOCKS-14.51%
CANADA-14.51%
Cott Corp. (Soft Drinks)(a) 3,000 91,757
----------------------------------------------------------------------
Cymat Corp. (Aluminum)(a) 178,600 75,526
----------------------------------------------------------------------
FirstService Corp. (Diversified Commercial
Services)(a) 17,700 391,025
----------------------------------------------------------------------
Husky Injection Molding Systems Ltd.
(Industrial Machinery)(a) 73,600 277,969
----------------------------------------------------------------------
Sleeman Breweries Ltd. (Brewers)(a) 22,900 214,382
----------------------------------------------------------------------
Vincor International Inc. (Distillers &
Vintners)(a) 7,300 154,351
======================================================================
Total Foreign Stocks (Cost $1,206,587) 1,205,010
======================================================================
|
FS-116
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-14.24%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-14.24%
Unsec. Disc. Notes, 0.90%, 05/03/04 (Cost
$1,182,941)(b) $1,183,000 $1,182,941
======================================================================
TOTAL INVESTMENTS-98.75% (Cost $8,180,940) 8,203,398
======================================================================
OTHER ASSETS LESS LIABILITIES-1.25% 103,883
======================================================================
NET ASSETS-100.00% $8,307,281
______________________________________________________________________
======================================================================
|
Investment Abbreviations
Disc. - Discount Unsec. - Unsecured |
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.
See accompanying notes which are an integral part of the financial statements.
FS-117
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost $8,180,940) $8,203,398
-----------------------------------------------------------
Cash 417
-----------------------------------------------------------
Receivables for:
Investments sold 223,439
-----------------------------------------------------------
Fund shares sold 88,689
-----------------------------------------------------------
Dividends 4,283
-----------------------------------------------------------
Amount due from advisor 6,830
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 452
-----------------------------------------------------------
Other assets 46,812
===========================================================
Total assets 8,574,320
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 237,024
-----------------------------------------------------------
Fund shares reacquired 1,235
-----------------------------------------------------------
Deferred compensation and retirement plans 452
-----------------------------------------------------------
Accrued distribution fees 3,473
-----------------------------------------------------------
Accrued trustees' fees 921
-----------------------------------------------------------
Accrued transfer agent fees 1,847
-----------------------------------------------------------
Accrued operating expenses 22,087
===========================================================
Total liabilities 267,039
===========================================================
Net assets applicable to shares outstanding $8,307,281
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,290,672
-----------------------------------------------------------
Undistributed net investment income (loss) (23,450)
-----------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 17,679
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 22,380
===========================================================
$8,307,281
___________________________________________________________
===========================================================
NET ASSETS:
Class A $5,294,640
___________________________________________________________
===========================================================
Class B $1,727,005
___________________________________________________________
===========================================================
Class C $1,237,483
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 38,153
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 501,263
___________________________________________________________
===========================================================
Class B 163,932
___________________________________________________________
===========================================================
Class C 117,446
___________________________________________________________
===========================================================
Class R 947
___________________________________________________________
===========================================================
Institutional Class 3,613
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.56
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.56 divided by
94.50%) $ 11.17
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.53
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.54
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.56
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.56
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-118
STATEMENT OF OPERATIONS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends $ 7,422
----------------------------------------------------------------------
Interest 2,824
======================================================================
Total investment income 10,246
======================================================================
EXPENSES:
Advisory fees 12,482
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 8,636
----------------------------------------------------------------------
Distribution fees:
Class A 2,817
----------------------------------------------------------------------
Class B 3,968
----------------------------------------------------------------------
Class C 2,667
----------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,645
----------------------------------------------------------------------
Trustees' fees 5,944
----------------------------------------------------------------------
Registration and filing fees 9,684
----------------------------------------------------------------------
Reports to shareholders 5,600
----------------------------------------------------------------------
Professional fees 23,894
----------------------------------------------------------------------
Other 3,165
======================================================================
Total expenses 107,365
======================================================================
Less: Fees waived, expenses reimbursed, and expense offset
arrangements (73,669)
======================================================================
Net expenses 33,696
======================================================================
Net investment income (loss) (23,450)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 23,198
----------------------------------------------------------------------
Foreign currencies (5,519)
======================================================================
17,679
======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 22,458
----------------------------------------------------------------------
Foreign currencies (78)
======================================================================
22,380
======================================================================
Net gain from investment securities and foreign currencies 40,059
======================================================================
Net increase in net assets resulting from operations $ 16,609
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-119
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
--------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (23,450)
--------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 17,679
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 22,380
==========================================================================
Net increase in net assets resulting from operations 16,609
==========================================================================
Share transactions-net:
Class A 5,321,207
--------------------------------------------------------------------------
Class B 1,700,765
--------------------------------------------------------------------------
Class C 1,220,547
--------------------------------------------------------------------------
Class R 10,000
--------------------------------------------------------------------------
Institutional Class 38,153
==========================================================================
Net increase in net assets resulting from share
transactions 8,290,672
==========================================================================
Net increase in net assets 8,307,281
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income (loss) of $(23,450)) $8,307,281
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-120
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Small Companies Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of the day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-121
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end
FS-122
of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $12,482 and reimbursed expenses of $61,161. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the period ended April 30, 2004, AISI retained $1,022 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $2,817, $3,968, $2,667 and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $9,012 in front-end sales commissions from the sale of Class A shares and $0, $0, $10 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $11 and reductions in custodian fees of $15 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $26.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
FS-123
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carry forward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carry forward actually available for the fund to utilize. The ability to use capital loss carry forward may be limited under the Internal Revenue Code and related regulations.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the period ended April 30, 2004 was $7,256,532 and $281,731, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 242,194
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (219,736)
==========================================================
Net unrealized appreciation of investment
securities $ 22,458
__________________________________________________________
==========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 8--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
---------------------------------------------------------------------------------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,2004
-------------------------
SHARES AMOUNT
---------------------------------------------------------------------------------------
Sold:
Class A 510,721 $5,419,564
---------------------------------------------------------------------------------------
Class B 165,572 1,717,922
---------------------------------------------------------------------------------------
Class C 117,564 1,221,816
---------------------------------------------------------------------------------------
Class R* 947 10,000
---------------------------------------------------------------------------------------
Institutional Class* 3,613 38,153
=======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 528 5,631
---------------------------------------------------------------------------------------
Class B (530) (5,631)
=======================================================================================
Reacquired:
Class A (9,986) (103,988)
---------------------------------------------------------------------------------------
Class B (1,110) (11,526)
---------------------------------------------------------------------------------------
Class C (118) (1,269)
=======================================================================================
787,201 $8,290,672
_______________________________________________________________________________________
=======================================================================================
|
* Class R shares and Institutional Class shares commenced sales on April 30, 2004.
FS-124
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.63
==============================================================================
Total from investment operations 0.56
==============================================================================
Net asset value, end of period $10.56
______________________________________________________________________________
==============================================================================
Total return(b) 5.60%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,295
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.00%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.02%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.30)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,645,835.
(d) Not annualized for a period less than one year.
FS-125
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.63
==============================================================================
Total from investment operations 0.53
==============================================================================
Net asset value, end of period $10.53
______________________________________________________________________________
==============================================================================
Total return(b) 5.30%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,727
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.65%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.67%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.95)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of $811,347.
(d) Not annualized for a period less than one year.
FS-126
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.64
==============================================================================
Total from investment operations 0.54
==============================================================================
Net asset value, end of period $10.54
______________________________________________________________________________
==============================================================================
Total return(b) 5.40%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,237
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.65%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.67%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.95)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of $545,255.
(d) Not annualized for a period less than one year.
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
---------------------------------------------------------------------------
Net asset value, beginning of period $10.56
---------------------------------------------------------------------------
Net investment income --
===========================================================================
Net asset value, end of period $10.56
___________________________________________________________________________
===========================================================================
Total return --
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets --
===========================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________
===========================================================================
Portfolio turnover rate(a) 11%
___________________________________________________________________________
===========================================================================
|
(a) Not annualized for a period of less than one year.
FS-127
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.56
-----------------------------------------------------------------------------------
Net investment income --
===================================================================================
Net asset value, end of period $10.56
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 38
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
===================================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 11%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for a period of less than one year.
NOTE 10--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related
FS-128
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,295 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
FS-129
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-130
AIM TRIMARK ENDEAVOR FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
PROSPECTUS
MARCH 1, 2004 AS REVISED NOVEMBER 1, 2004
Institutional Classes
AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund each seeks to provide long-term growth of capital.
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.
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ AIM Trimark Endeavor Fund 1 AIM Trimark Fund 1 AIM Trimark Small Companies Fund 1 All Funds 1 PRINCIPAL RISKS OF INVESTING IN THE FUNDS 2 ------------------------------------------------------ All Funds 2 Trimark 2 Small Companies 2 PERFORMANCE INFORMATION 3 ------------------------------------------------------ FEE TABLE AND EXPENSE EXAMPLE 3 ------------------------------------------------------ Fee Table 3 Expense Example 3 FUND MANAGEMENT 4 ------------------------------------------------------ The Advisors 4 Advisor Compensation 4 Portfolio Managers 4 Prior Performance of the Subadvisor 4 OTHER INFORMATION 7 ------------------------------------------------------ Dividends and Distributions 7 Suitability for Investors 7 Future Limited Fund Offering 7 FINANCIAL HIGHLIGHTS 8 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Purchasing Shares A-1 Redeeming Shares A-2 Pricing of Shares A-2 Taxes A-3 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, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a service mark of A I M Management Group Inc. and AIM Funds Management 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 TRIMARK ENDEAVOR FUND (ENDEAVOR)
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 net assets in marketable 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.
The fund may invest up to 25% of its total assets in foreign securities.
AIM TRIMARK FUND (TRIMARK)
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 generally by investing, normally, at least 75% of its net assets in marketable equity securities of medium- and large-sized companies, including convertible securities, of domestic issuers and foreign issuers. The fund will normally invest in the securities of companies located in at least three countries, including the United States.
The fund emphasizes investment in companies in developed countries such as the United States, the countries of Western Europe and certain countries in the Pacific Basin. The fund may also invest in companies located in developing countries, i.e., those that are in the initial stages of their industrial cycles.
AIM TRIMARK SMALL COMPANIES FUND (SMALL COMPANIES)
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 marketable equity securities, including convertible securities, of small-capitalization companies. 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 companies within the Russell 2000--Registered Trademark-- Index are considered representative of small-sized companies.
In complying with this 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 25% of its total assets in foreign securities.
ALL FUNDS
In selecting securities, the portfolio managers seek to identify companies that are both attractively priced relative to their prospective earnings and cash flow, and have strong long-term growth prospects. In evaluating companies, the portfolio managers emphasize several factors such as the quality of the company's management team, their commitment to securing a competitive advantage, and the company's sustainable growth potential. The portfolio managers typically consider whether to sell a security in any of four circumstances: (1) a more compelling investment opportunity exists, (2) the full value of the investment is deemed to have been realized, (3) there has been a fundamental negative change in management strategy of the company or (4) there has been a fundamental negative change in competitive environment.
For cash management purposes, each of the funds may also hold a portion of its assets in cash or cash equivalents such as U.S. Government agency discount notes, or shares of affiliated money market funds.
Under normal conditions, the top ten holdings may comprise up to 50% of the fund's total assets. Any percentage limitations with respect to assets of a fund are applied at the time of purchase.
Each fund may invest up to 10% of its total assets in fixed-income securities such as investment-grade debt securities, longer-term U.S. government securities and high-quality money market investments.
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.
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.
The values of the convertible securities in which the funds may invest will also be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to a fund.
Because a large percentage of each fund's assets may be invested in a limited number of securities, a change in the value of these securities could significantly affect the value of your investment in a fund.
The funds may participate in the initial public offering (IPO) market in some market cycles. Because of each fund's small asset base, any investment a fund may make in IPOs may significantly affect that fund's total return. As each fund's assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on a fund's total return.
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.
TRIMARK
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
SMALL COMPANIES
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 small-cap companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since equity securities of small-cap 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.
PERFORMANCE INFORMATION
Securities and Exchange Commission ("SEC") rules do not allow us to provide a bar chart and performance table for funds that do not have at least a full calendar year of performance.
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 ------------------------------------------------------------------------------------ (fees paid directly from SMALL your investment) ENDEAVOR TRIMARK COMPANIES ------------------------------------------------------------------------------------ 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) ------------------------------------------------------------------------------------- (expenses that are deducted SMALL from fund assets) ENDEAVOR TRIMARK COMPANIES ------------------------------------------------------------------------------------- Management Fees 0.80% 0.85% 0.85% Distribution and/or Service (12b-1) Fees None None None Other Expenses(2) 0.55 0.55 0.55 Total Annual Fund Operating Expenses 1.35 1.40 1.40 ------------------------------------------------------------------------------------- |
(1) There is no guarantee that actual expenses will be the same as those shown
in the table.
(2) Other Expenses are based on estimated amounts for the current fiscal year.
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
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Endeavor $137 $428
Trimark 143 443
Small Companies 143 443
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THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor and manages the investment operations of each fund and has agreed to perform or arrange for the performance of each fund's day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM Funds Management Inc. (the subadvisor) is located at 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7. The subadvisor is responsible for each fund's day- to-day management, including each fund's investment decisions and the execution of securities transactions with respect to each fund.
The advisor has acted as an investment advisor since its organization in 1976 and the subadvisor has acted as an investment advisor since 1981. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the funds, encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from Endeavor calculated at the annual rate of 0.80% of the first $1 billion of the average daily net assets and 0.75% of the average daily net assets over $1 billion. The advisor is to receive a fee from each of Trimark and Small Companies calculated at the annual rate of 0.85% of the first $1 billion of the average daily net assets and 0.80% of the average daily net assets over $1 billion.
PORTFOLIO MANAGERS
The subadvisor 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
ENDEAVOR
- Geoff MacDonald (lead manager), Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1998.
- Jeff Hyrich, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1999. From 1997 to 1999, he was an investment analyst with Ontario Teachers' Pension Plan Board.
More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
TRIMARK
- Tye Bousada (lead manager), Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1999. From 1996 to 1999, he was an investment analyst and portfolio manager with Ontario Teachers' Pension Plan Board.
- Dana Love, Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the subadvisor and/or its affiliates since 1999. From 1997 to 1998, he was a full-time student.
More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
SMALL COMPANIES
- Robert Mikalachki, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1999. From 1996 to 1999, he was a senior associate with PricewaterhouseCoopers.
He is assisted by the AIM Trimark Small Companies Team. More information on the fund's management team may be found on our website (http://www.aiminvestments.com/teams). The website is not a part of this prospectus.
PRIOR PERFORMANCE OF THE SUBADVISOR
In addition to acting as subadviser to Trimark, the subadvisor manages other investment portfolios with investment objectives, policies, strategies and risks that are substantially similar to Trimark. On the following pages, you will find information about the prior performance of the AIM Trimark Composite (the Composite) and separately the Trimark Fund (Trimark (CA)) and the Trimark Select Growth Fund, two Canadian mutual fund trusts (the Canadian Funds) that make up the Composite.
PERFORMANCE INFORMATION
The performance information provided is organized into columns. The first column shows the United States Dollar Performance of the Composite which is the asset-weighted performance of the Canadian Funds that make up the Composite calculated in United States Dollars. The next two columns show the performance of each of the underlying Canadian Funds that make up the Composite calculated in United States Dollars. The United States Dollar Performance reflects the performance that a U.S. investor would have received based on conversion of currency (using exchange rates published by the Federal Reserve Board of New York) between the Canadian Dollar and the United States Dollar. The fourth column shows the performance of the MSCI World Index in United States Dollars which includes reinvestment of dividends and distributions. The MSCI World Index is
a broad based securities market index representative of global developed equity markets.
The fifth column shows the Canadian Dollar Performance of the Composite which is the asset-weighted performance of the Canadian Funds calculated in Canadian Dollars. The Canadian Dollar Performance reflects the actual performance achieved by the Canadian Funds that make up the Composite. The next two columns show the performance of each of the underlying Canadian Funds that make up the Composite calculated in Canadian Dollars. The last column shows the performance of the MSCI World Index in Canadian Dollars which includes reinvestment of dividends and distributions.
COMPOSITE AND CANADIAN FUNDS PERFORMANCE CALCULATION
The Composite consists of the Canadian Funds' performance combined on an asset weighted basis. The Composite and the Canadian Funds are not subject to certain investment limitations, diversification requirements, and other restrictions imposed by the Investment Company Act of 1940 and the U.S. Internal Revenue Code, which, if applicable, may have adversely affected the performance results of the Canadian Funds and the Composite. The Composite and the Canadian Funds are also not subject to the same level of expenses to which Trimark is subject. The Composite and the Canadian Funds are not available to U.S. investors.
Calendar year Composite returns are calculated by time and asset weighting and reflect compounded monthly returns for all twelve months, using the beginning-of-month and end-of-month market prices either in United States Dollars (for the U.S. Dollar performance) or in Canadian Dollars (for the Canadian Dollar performance). The relevant net asset values are converted from Canadian Dollars to United States Dollars by applying the effective currency exchange rate (published by the Federal Reserve Bank of New York) at the beginning and the end of each month to the Canadian Dollar net asset values. Average annual total returns are computed by compounding calculated monthly returns for the respective time periods. An average annual total return reflects the compounded annual rate of return that would have produced the same cumulative total return if the performance had been constant over the entire period. Because average annual returns tend to even out variations, investors should recognize that such returns are not the same as actual year-by-year results.
OTHER IMPORTANT INFORMATION
The performance of the Composite and Canadian Funds do not represent the past performance of Trimark and are not an indication of the future performance of Trimark. The future performance of Trimark may be better or worse than the future performance of the Composite and Canadian Funds due to, among other things, differences in portfolio holdings, sales charges, expenses, asset sizes, and cash flows. Also, you may experience different investment results depending on different currency conversion rates in the future.
The Composite and Canadian Funds performance data shown below includes reinvestment of all dividends, interest and income, realized and unrealized gains or losses and is net of applicable investment advisory fees, brokerage commissions and execution costs, custodial fees and any applicable foreign withholding taxes, without provision for federal and state income taxes, if any. The Composite does not include sales loads applicable to the Canadian Funds comprising the Composite.
CALENDAR YEAR ANNUAL TOTAL RETURNS (%)
TRIMARK TRIMARK
TRIMARK SELECT SELECT
FUND GROWTH MSCI WORLD TRIMARK GROWTH MSCI WORLD
COMPOSITE(1) (CA)(2) FUND(3) INDEX(4) COMPOSITE(1) FUND (CA)(2) FUND(3) INDEX(4)
YEAR (AS OF 12/31) (U.S. $) (U.S. $) (U.S. $) (U.S. $) (CANADIAN $) (CANADIAN $) (CANADIAN $) (CANADIAN $)
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1994 N/A 8.96% 7.59% 5.08% N/A 14.93% 13.47% 11.32%
1995 N/A 19.83% 17.29% 20.72% N/A 16.66% 14.23% 17.38%
1996 13.77% 14.24% 13.51% 13.48% 14.26% 14.71% 14.02% 14.04%
1997 8.98% 11.08% 7.93% 15.76% 13.75% 16.00% 12.62% 20.86%
1998 (1.78)% (0.99)% (2.16)% 24.34% 5.60% 6.41% 5.21% 33.46%
1999 23.15% 22.75% 23.33% 24.93% 15.84% 15.51% 15.99% 18.05%
2000 7.25% 8.59% 6.69% (13.18)% 11.26% 12.63% 10.69% (10.15)%
2001 3.65% 3.82% 3.57% (16.82)% 9.94% 10.12% 9.85% (11.60)%
2002 (4.97)% (4.47)% (5.20)% (19.89)% (6.08)% (5.59)% (6.31)% (20.71)%
2003 30.63% 31.08% 30.41% 33.11% 7.32% 7.68% 7.13% 8.88%
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The Composite year-to-date total return as of July 31, 2004 was -0.89% (U.S. $) and 1.90% (Canadian $).
Trimark Fund (CA)'s Series SC year-to-date total return as of July 31, 2004 was -0.65% (U.S. $) and 2.14% (Canadian $).
Trimark Select Growth Fund's Series A year-to-date total return as of July 31, 2004 was -1.03% (U.S. $) and 1.75% (Canadian $).
(1) Does not reflect the sales loads applicable to the Canadian Funds (Trimark Fund (CA), Series SC and Trimark Select Growth Fund, Series A) comprising the Composite.
(2) The information shown is for Series SC of Trimark Fund (CA) and does not reflect the sales loads applicable to such series. If it did, the annual total returns shown would be lower. Trimark Fund (CA) is not available to U.S. investors.
(3) The information shown is for Series A of Trimark Select Growth Fund and does not reflect the sales loads applicable to such series. If it did, the annual total returns shown would be lower. Trimark Select Growth Fund is not available to U.S. investors.
(4) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. This index does not incur fees, expenses or taxes and cannot be purchased directly by investors.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 2003:
TRIMARK TRIMARK
TRIMARK SELECT SELECT
FUND GROWTH MSCI WORLD TRIMARK GROWTH MSCI WORLD
COMPOSITE(1) (CA)(2) FUND(3) INDEX(4) COMPOSITE(1) FUND (CA)(2) FUND(3) INDEX(4)
(U.S. $) (U.S. $) (U.S. $) (U.S. $) (CANADIAN $) (CANADIAN $) (CANADIAN $) (CANADIAN $)
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1 Year 30.63% 24.53% 23.89% 33.11% 7.32% 2.30% 1.78% 8.88%
3 Years 8.77% 7.29% 6.75% (3.92)% 3.48% 2.08% 1.56% (8.62)%
5 Years 11.19% 10.48% 9.86% (0.77)% 7.39% 6.71% 6.10% (4.14)%
8 Years 9.52% 9.51% 8.49% 5.81% 8.78% 8.77% 7.75% 5.10%
10 Years N/A 10.45% 9.24% 7.14% N/A 10.14% 8.94% 6.88%
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(1) Does not reflect the sales loads applicable to the Canadian Funds (Trimark Fund (CA), Series SC and Trimark Select Growth Fund, Series A) comprising the Composite.
(2) The information shown is for Series SC of the Trimark Fund (CA). The information reflects the maximum front-end sales load applicable to Series SC. The Trimark Fund (CA) is not available to US investors.
(3) The information shown is for Series A of the Trimark Select Growth Fund. The
information reflects the maximum front-end sales load applicable to Series
A. The Trimark Select Growth Fund is not available to US investors.
(4) The Morgan Stanley Capital International World Index measures the performance of securities listed on stock exchanges of 23 developed countries. This index does not incur fees, expenses or taxes and cannot be purchased directly by investors.
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) of the Internal Revenue Code (the "Code") (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.
FUTURE LIMITED FUND OFFERING (SMALL COMPANIES)
Due to the sometimes limited availability of common stocks of smaller companies that meet the investment criteria of the fund, the fund may limit public sales of its shares to certain investors shortly after the fund reaches $500 million in assets. 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 the date the fund limits sales to certain investors 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 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.
During the limited offering period, 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.
During the limited offering period, 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.
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.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
This information, along with the fund's financial statements, is included in the fund's semi-annual report, which is available upon request.
ENDEAVOR --
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
Net asset value, beginning of period $10.88
-----------------------------------------------------------------------------------
Net investment income --
===================================================================================
Net asset value, end of period $10.88
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 35
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
===================================================================================
Ratio of net investment income (loss) to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 16%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for periods less than one year.
TRIMARK --
INSTITUTIONAL
CLASS
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
Net asset value, beginning of period $10.51
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income --
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
=============================================================================
Total from investment operations --
=============================================================================
Net asset value, end of period $10.51
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
-----------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
=============================================================================
Ratio of net investment income to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 22%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
FINANCIAL HIGHLIGHTS (CONTINUED)
SMALL COMPANIES
--
INSTITUTIONAL
CLASS
-----------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
Net asset value, beginning of period $10.56
---------------------------------------------------------------------------------
Net investment income --
=================================================================================
Net asset value, end of period $10.56
_________________________________________________________________________________
=================================================================================
Total return --
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 38
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets --
=================================================================================
Ratio of net investment income to average net assets --
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate(a) 11%
_________________________________________________________________________________
=================================================================================
|
(a) Not annualized for a period of less than one year.
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. Additionally, Federal law requires that the AIM fund verify and record your identifying information.
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,
AIM Investment Services, Inc.,
P.O. Box 0843,
Houston, TX 77210-0843.
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: AIM Investment
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.
INSTCL--04/04
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.
REDEMPTIONS IN KIND
Although the AIM funds and the INVESCO funds generally intend to pay redemption
proceeds solely in cash, the AIM funds and the INVESCO funds reserve the right
to satisfy redemption requests by making payment in securities or other property
(known as a redemption in kind).
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.
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
AIM funds' shares are determined as of the close of the respective markets.
Events affecting the values of such 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 ordinarily be reflected in the
computation of the AIM fund's net asset value. If a development/ event is so
significant such that there is a reasonably high degree of certainty as to both
the effect and the degree of the 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. Adjustments to closing prices to reflect fair value on affected
foreign securities may be provided by an independent pricing service. Multiple
factors may be considered by the independent pricing service in determining
adjustments to reflect fair value and may include information relating to sector
indices, ADRs, domestic and foreign index futures, and exchange-traded funds.
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.
INSTCL--04/04
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 and the type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend 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 and/or INVESCO 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.
INSTCL--04/04
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 the 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: AIM Investment 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 can also 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.
AIM Trimark Endeavor Fund, AIM Trimark Fund,
AIM Trimark Small Companies Fund
SEC 1940 Act file number: 811-05426
AIMinvestments.com AIF-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
|
STATEMENT OF
ADDITIONAL INFORMATION
AIM INVESTMENT FUNDS
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 INVESTMENT FUNDS 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:
AIM INVESTMENT SERVICES, INC.
P.O. BOX 4739
HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 451-4246
This Statement of Additional Information, dated March 1, 2004, as revised November 1, 2004 relates to the Prospectus for the Institutional Classes of the following Funds:
FUND DATED
AIM Trimark Endeavor Fund March 1, 2004, as revised April 30, 2004
AIM Trimark Fund March 1, 2004, as revised November 1, 2004
AIM Trimark Small Companies Fund March 1, 2004, as revised April 30, 2004
|
AIM INVESTMENT FUNDS
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.................................................. 7
Foreign Investments................................................. 7
Debt Investments.................................................... 9
Other Investments................................................... 10
Investment Techniques............................................... 12
Derivatives......................................................... 16
Additional Securities or Investment Techniques...................... 22
Fund Policies.............................................................. 24
Temporary Defensive Positions.............................................. 26
MANAGEMENT OF THE TRUST......................................................... 26
Board of Trustees.......................................................... 26
Management Information..................................................... 26
Trustee Ownership of Fund Shares.................................... 28
Factors Considered in Approving the Investment Advisory Agreement... 28
Compensation............................................................... 28
Retirement Plan For Trustees........................................ 29
Deferred Compensation Agreements.................................... 29
Purchase of Class A Shares of the Funds at Net Asset Value.......... 29
Codes of Ethics............................................................ 30
Proxy Voting Policies...................................................... 30
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................. 30
INVESTMENT ADVISORY AND OTHER SERVICES.......................................... 30
Investment Advisor......................................................... 30
Investment Sub-Advisor..................................................... 31
Service Agreements......................................................... 32
Other Service Providers.................................................... 32
BROKERAGE ALLOCATION AND OTHER PRACTICES........................................ 33
Brokerage Transactions..................................................... 33
Commissions................................................................ 34
Brokerage Selection........................................................ 34
Directed Brokerage (Research Services)..................................... 35
Regular Brokers or Dealers................................................. 35
Allocation of Portfolio Transactions....................................... 35
Allocation of Initial Public Offering ("IPO") Transactions................. 36
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................... 36
Purchase and Redemption of Shares.......................................... 36
Redemptions by the Funds................................................... 36
|
Offering Price............................................................. 37
Redemption In Kind......................................................... 38
Backup Withholding......................................................... 38
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................ 39
Dividends and Distributions................................................ 39
Tax Matters................................................................ 40
DISTRIBUTION OF SECURITIES...................................................... 46
Distributor................................................................ 46
CALCULATION OF PERFORMANCE DATA................................................. 47
REGULATORY INQUIRIES AND PENDING LITIGATION..................................... 52
APPENDICES:
RATINGS OF DEBT SECURITIES...................................................... A-1
TRUSTEES AND OFFICERS........................................................... B-1
TRUSTEE COMPENSATION TABLE...................................................... C-1
PROXY VOTING POLICIES........................................................... D-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................. E-1
PERFORMANCE DATA................................................................ F-1
REGULATORY INQUIRIES AND PENDING LITIGATION..................................... G-1
FINANCIAL STATEMENTS............................................................ FS
|
GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Investment Funds (the "Trust") is 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. The Trust currently consists of six separate portfolios: AIM Developing Markets Fund, AIM Global Health Care Fund, AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund. This Statement of Additional Information relates solely to the Institutional Classes of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies 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 of the Trust (the "Board") 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 October 29, 1987 as a Maryland corporation. The Trust reorganized as a Delaware business trust on May 7, 1998. All historical financial and other information contained in this Statement of Additional Information for periods prior to September 8, 1998 relating to these Funds (or a class thereof), except for AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, is that of AIM Investment Funds, Inc. the Maryland corporation (or the corresponding class thereof). Each of AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund commenced operations as a series of the Trust.
Effective shortly after AIM Trimark Small Companies Fund reaches $500
million in assets, the Fund will limit public sales of its shares to certain
investors. The following types of investors may continue to invest in the Fund
if they are invested in the Fund as of the date on which the Fund limited public
sales of its shares to certain investors and remain invested in the Fund after
that date: 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").
Please contact AIM Distributors for approval. The following types of investors
may open new accounts in either 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 Trimark Small Companies 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, 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 separate classes of shares as follows:
INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS R CLASS
---- ------- ------- ------- ------- -------------
AIM Developing Markets Fund X X X
AIM Global Health Care Fund X X X
AIM Libra Fund X X X
AIM Trimark Endeavor Fund X X X X X
AIM Trimark Fund X X X X X
AIM Trimark Small Companies Fund X X X X X
|
This Statement of Additional Information relates solely to the Institutional Classes of the Funds.
Each class of shares represents an interest 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, conversion 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 Registered Trademark. 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 INVESTMENT FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND
SECURITY/ AIM TRIMARK
INVESTMENT AIM TRIMARK AIM TRIMARK SMALL
TECHNIQUE ENDEAVOR FUND FUND COMPANIES 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 X X
Foreign Exchange Transactions X X X
DEBT INVESTMENTS
U.S. Government Obligations X X X
Rule 2a-7 Requirements
Mortgage-Backed and Asset-Backed Securities
Collateralized Mortgage Obligations
Bank Instruments
Commercial Instruments
Participation Interests
Municipal Securities
Municipal Lease Obligations
Investment Grade Corporate Debt Obligations X X X
Junk Bonds X X X
Liquid Assets X X X
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
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FUND
SECURITY/ AIM TRIMARK
INVESTMENT AIM TRIMARK AIM TRIMARK SMALL
TECHNIQUE ENDEAVOR FUND FUND COMPANIES FUND
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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
Borrowing X X X
Lending Portfolio Securities X X X
Repurchase Agreements X X X
Reverse Repurchase Agreements
Dollar Rolls
Illiquid Securities X X X
Rule 144A Securities X X X
Unseasoned Issuers X
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 on Futures
Contracts X X X
Forward Currency Contracts X X X
Cover X X X
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FUND
SECURITY/ AIM TRIMARK
INVESTMENT AIM TRIMARK AIM TRIMARK SMALL
TECHNIQUE ENDEAVOR FUND FUND COMPANIES FUND
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ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
Loan Participations and Assignments
Privatizations X X X
Indexed Commercial Paper
Samurai and Yankee Bonds
Premium Securities
Structured Investments
Stripped Income Securities
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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.
The Funds will invest in a convertible debt security based primarily on the characteristics of the equity security into which it converts, and without regard to the credit rating of the convertible security (even if the credit rating is below investment grade). To the extent that a Fund invests in convertible debt securities with credit ratings below investment grade, such securities may have a higher likelihood of default, although this may be somewhat offset by the convertibility feature. See also "Debt Investments - Junk Bonds" below.
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.
AIM Trimark Fund may invest up to 100% of its total assets in foreign securities. AIM Trimark Endeavor Fund and AIM Trimark Small Companies Fund may each 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.
Risks of Developing Countries. AIM Trimark Endeavor Fund and AIM
Trimark Fund may each invest up to 15% and AIM Trimark Small Companies Fund may
each invest up to 5% of their respective total assets in securities of companies
located in developing countries. Developing countries are those countries which
are not included in the MSCI World Index. The Funds consider various factors
when determining whether a company is in a developing country, including whether
(1) it is organized under the laws of a developing country; (2) it has a
principal office in a developing country; (3) it derives 50% or more of its
total revenues from business in a developing country; or (4) its securities are
traded principally on a stock exchange, or in an over-the-counter market, in a
developing country. 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 Funds 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 government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds."
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
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.
JUNK BONDS. Each of the funds may invest in junk bonds. Junk bonds are lower-rated or non-rated debt securities. Junk bonds are considered speculative with respect to their capacity to pay interest and repay principal in accordance with the terms of the obligation. While generally providing greater income and opportunity for gain, non-investment grade debt securities are subject to greater risks than higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly leveraged issuers of high yield securities may experience financial stress, and may not have sufficient revenues to meet their interest payment obligations. Economic downturns tend to disrupt the market for junk bonds, lowering their values, and increasing their price volatility. The risk of issuer default is higher with respect to junk bonds because such issues are generally unsecured and are often subordinated to other creditors of the issuer.
The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. The lower the rating of a junk bond, the more speculative its characteristics.
The Funds may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid secondary market may have an adverse effect on the market price and a Fund's ability to dispose of particular issues and may also make it more difficult for the Fund to obtain accurate market quotations in valuing these assets. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds at an unfavorable price. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments than those of higher-rated debt securities. AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund may each invest up to 5% of total assets in junk bonds.
Descriptions of debt securities ratings are found in Appendix A.
LIQUID ASSETS. 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, and municipal obligations).
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.
VARIABLE OR FLOATING RATE INSTRUMENTS. Each Fund may invest in securities which have variable or floating interest rates which are readjusted on set dates (such as the last day of the month or calendar quarter) in the case of variable rates or whenever a specified interest rate change occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate securities than for fixed rate obligations. Many securities with variable or floating interest rates purchased by a Fund are subject to payment of principal and accrued interest (usually within seven days) on the Fund's demand. The terms of such demand instruments require payment of principal and accrued interest by the issuer, a guarantor, and/or a liquidity provider. All variable or floating rate instruments will meet the applicable quality standards of a Fund. AIM will monitor the pricing, quality and liquidity of the variable or floating rate securities held by the Funds.
INDEXED SECURITIES. Each Fund may invest in indexed securities the value of which is linked to interest rates, commodities, indices or other financial indicators. Most indexed securities are short to intermediate term fixed income securities whose values at maturity (principal value) or interest rates rise or fall according to changes in the value of one or more specified underlying instruments. Indexed securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying instrument appreciates), and may have return characteristics similar to direct investments in the underlying instrument or to one or more options on the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself and could involve the loss of all or a portion of the principal amount of the indexed security.
ZERO-COUPON AND PAY-IN-KIND SECURITIES. Each Fund may, but does not currently intend to, invest in zero-coupon or pay-in-kind securities. These securities are debt securities that do not make regular cash interest payments. Zero-coupon securities are sold at a deep discount to their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because zero-coupon and pay-in-kind securities do not pay current cash income, the price of these securities can be volatile
when interest rates fluctuate. While these securities do not pay current cash income, federal tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accrued during that year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain excise taxes, the Fund may be required to distribute a portion of such discount and income, and may be required to dispose of other portfolio securities, which could occur during periods of adverse market prices, in order to generate sufficient cash to meet these distribution requirements.
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 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 funds advised by AIM (the "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 borrowings 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 under the 1933 Act, 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, 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.
UNSEASONED ISSUERS. AIM Trimark Small Companies Fund may invest in equity securities of unseasoned issuers. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies.
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 the 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. A 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 a 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
Loan Participations and Assignments. Each Fund may purchase participations in corporate loans. Participation interests generally will be acquired from a commercial bank or other financial institution (a "Lender") or from other holders of a participation interest (a "Participant"). The purchase of a participation interest either from a Lender or a Participant will not result in any direct contractual relationship with the borrowing company (the "Borrower"). A Fund generally will have no right directly to enforce compliance by the Borrower with the terms of the credit agreement. Instead, the Fund will be required to rely on the Lender or the Participant that sold the participation interest both for the enforcement of the Fund's rights against the Borrower and for the receipt and processing of payments due to the Fund under the loans. Under the terms of a participation interest, a Fund may be regarded as a creditor of the Participant and thus a Fund is subject to the credit risk of both the Borrower and Lender or a Participant. Participation interests are generally subject to restrictions on resale. The Fund considers participation interests to be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities.
PRIVATIZATIONS. Each of the funds may invest in privatizations. The governments of some foreign countries have been engaged in selling part or all of their stakes in government-owned or controlled enterprises ("privatizations"). AIM believes that privatizations may offer opportunities for significant capital appreciation and intends to invest assets of the Funds in privatizations in appropriate circumstances. In certain foreign countries, the ability of foreign entities such as the Funds to participate may be limited by local law, or the terms on which a Fund may be permitted to participate may be less advantageous than those for local investors. There can be no assurance that foreign governments will
continue to sell companies currently owned or controlled by them or that privatization programs will be successful.
INDEXED COMMERCIAL PAPER. Each Fund may invest without limitation in commercial paper which is indexed to certain specific foreign currency exchange rates. The terms of such commercial paper provide that its principal amount is adjusted upwards or downwards (but not below zero) at maturity to reflect changes in the exchange rate between two currencies while the obligation is outstanding. The Fund will purchase such commercial paper with the currency in which it is denominated and, at maturity, will receive interest and principal payments thereon in that currency, but the amount of principal payable by the issuer at maturity will change in proportion to the change (if any) in the exchange rate between the two specified currencies between the date the instrument is issued and the date the instrument matures. While such commercial paper entails the risk of loss of principal, the potential for realizing gains as a result of changes in foreign currency exchange rates enables the funds to hedge against a decline in the U.S. dollar value of investments denominated in foreign currencies while seeking to provide an attractive money market rate of return. The Fund will not purchase such commercial paper for speculation.
SAMURAI AND YANKEE BONDS. Subject to their fundamental investment restrictions, each Fund may invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai bonds"), and may invest in dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds issued in their countries of domicile, such bond issues normally carry a higher interest rate but are less actively traded. It is the policy of the Fund to invest in Samurai or Yankee bond issues only after taking into account considerations of quality and liquidity, as well as yield.
PREMIUM SECURITIES. Each Fund may invest in income securities bearing coupon rates higher than prevailing market rates. Such "premium" securities are typically purchased at prices greater than the principal amounts payable on maturity. The Fund will not amortize the premium paid for such securities in calculating its net investment income. As a result, in such cases the purchase of such securities provides the Fund a higher level of investment income distributable to shareholders on a current basis than if the Fund purchased securities bearing current market rates of interest. If securities purchased by the Fund at a premium are called or sold prior to maturity, the Fund will realize a loss to the extent the call or sale price is less than the purchase price. Additionally, the Fund will realize a loss if it holds such securities to maturity.
STRUCTURED INVESTMENTS. Each Fund may invest a portion of its assets in interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of Sovereign Debt. This type of restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments (such as commercial bank loans or Brady Bonds) and the issuance by that entity of one or more classes of securities ("Structured Investments") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued Structured Investments to create securities with different investment characteristics such as varying maturities, payment priorities and interest rate provisions, and the extent of the payments made with respect to Structured Investments is dependent on the extent of the cash flow on the underlying instruments. Because Structured Investments of the type in which the Fund anticipates it will invest typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments.
Each Fund is permitted to invest in a class of Structured Investments that is either subordinated or not subordinated to the right of payment of another class. Subordinated Structured Investments typically have higher yields and present greater risks than unsubordinated Structured Investments.
Certain issuers of Structured Investments may be deemed to be
"investment companies" as defined in the 1940 Act. As a result, each Fund's
investment in these Structured Investments may be limited by the restrictions
contained in the 1940 Act described below under "Investment Strategies and Risks
- Other Investment Companies." Structured Investments are typically sold in
private placement transactions, and there currently is no active trading market
for Structured Investments.
STRIPPED INCOME SECURITIES. Each Fund may invest a portion of its assets in stripped income securities, which are obligations representing an interest in all or a portion of the income or principal components of an underlying or related security, a pool of securities or other assets. In the most extreme case, one class will receive all of the interest (the "interest only class" or the "IO class"), while the other class will receive all of the principal (the "principal-only class" or the "PO class"). The market values of stripped income securities tend to be more volatile in response to changes in interest rates than are conventional income securities.
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 and the sub-advisor must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board.
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 AIM Funds, subject to the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33-1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker-dealers or an AIM Fund. The Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets or when any borrowings from an AIM 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 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.
(7) The Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
Additional Non-Fundamental Policy. As a non-fundamental policy AIM Trimark Small Companies Fund normally invests at least 80% of its assets in marketable equity 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.
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. The Board 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. 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 are the Audit Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Committee Relating to Market Timing Issues.
The members of the Audit Committee are Bob R. Baker, James T. Bunch, Edward K. Dunn, Jr. (Chair), Lewis F. Pennock, Dr. Larry Soll, Dr. Prema Mathai-Davis and Ruth H. Quigley (Vice Chair). The Audit Committee is responsible for: (i) the appointment, compensation and oversight of any independent auditors employed by each Fund (including monitoring the independence, qualifications and performance of such auditors and resolution of disagreements between Funds' management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services; (ii) overseeing the financial reporting process of each Fund; (iii) monitoring the process and the resulting financial statements prepared by management to promote accuracy and integrity of the financial statements and asset valuation; (iv) assisting the Board's oversight of each Fund's compliance with legal and regulatory requirements that relate to the Fund's accounting and financial reporting, internal control over financial reporting and independent audits; (v) to the extent required by Section 10A of the Securities Exchange Act of 1934, pre-approving all permissible non-audit services that are provided to each Fund by its independent auditors; (vi) pre-approving, in accordance with Item 2.01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by each Fund's independent auditors to the Fund's investment advisor and certain other affiliated entities; and (vii) to the extent required by Regulation 14A, preparing an audit committee report for inclusion in each Fund's annual proxy statement. During the fiscal year ended October 31, 2003, the Audit Committee held seven meetings.
The members of the Governance Committee are Messrs. Frank S. Bayley, Bruce L. Crockett (Chair), Albert R. Dowden, Jack M. Fields (Vice Chair), Gerald J. Lewis and Louis S. Sklar. The Governance Committee is responsible for: (i) nominating persons who are not interested persons of the Trust 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 Trust at meetings called for the election of trustees; (ii) nominating persons for appointment as members of each committee of the Board, including, without limitation, the Audit Committee, the Governance Committee, the Investments Committee and the Valuation Committee, and to nominate persons for appointment as chair and vice chair of each such committee; (iii) reviewing from time to time the compensation payable to the 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 Trust.
The Governance Committee will consider nominees recommended by a
shareholder to serve as trustees, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
October 31, 2003, the Governance Committee held five meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of a Fund desiring to nominate a trustee for election at a shareholder meeting must submit to the Trust's Secretary the nomination in writing not later than the close of business on the later of the 90th day prior to such shareholder meeting or the tenth day following the day on which public announcement is made of the shareholder meeting and not earlier than the close of business on the 120th day prior to the shareholder meeting.
The members of the Investments Committee are Messrs. Baker (Vice Chair), Bayley (Vice Chair), Bunch, Crockett, Dowden (Chair), Dunn, Fields, Lewis, Pennock, Sklar and Soll, and Carl Frischling, and 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 October 31, 2003, the Investments Committee held four meetings.
The members of the Valuation Committee are Messrs. Dunn, Pennock and Soll (Chair), and Miss Quigley (Vice Chair). The Valuation Committee meets on an ad hoc basis when the Board is not available to review matters related to valuation. During the fiscal year ended October 31, 2003, the Valuation Committee held one meeting.
The Members of the Special Committee Relating to Market Timing Issues are Messrs. Crockett, Dowden, Dunn, and Lewis (Chair). The purpose of the Special Committee Relating to Market Timing Issues is to remain informed on matters relating to alleged excessive short term trading in shares of the Funds ("market timing") and to provide guidance to special counsel for the independent trustees on market timing issues and related matters between meetings of the independent trustees. During the fiscal year ended October 31, 2003, the Special Committee Relating to Market Timing Issues did not meet.
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 (the "Advisory Agreement") and the sub-advisory agreement between AIM and AIM Funds Management Inc. (the "Sub-Advisor") (collectively with AIM, the "Advisors") for the Funds (the "Sub-Advisory Agreement") (collectively with the Advisory Agreement, the "Advisory Agreements") were re-approved for AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund by the Board at a meeting held on June 8-9, 2004. In evaluating the fairness and reasonableness of the Advisory Agreements, the Board considered a variety of factors for each Fund, as applicable including: the requirements of each Fund for investment supervisory and administrative services; the quality of the Advisors' services, including a review of each Fund's investment performance, if applicable, and the Advisors' investment personnel; the size of the fees in relationship to the extent and quality of the investment advisory services rendered; fees charged to the Advisors' 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 in relationship to contractual limitations; any fee waivers (or payments of Fund expenses) by the Advisors; the Advisors' profitability; the benefits received by the Advisors 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 the Advisors and conditions and trends prevailing in the economy, the securities markets and the mutual fund industry; and the historical relationship between each Fund and the Advisors.
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 with respect to each Fund: (i) the services provided to the Fund and its shareholders were adequate; (ii) the Advisory Agreements were fair and reasonable under the circumstances; and (iii) the fees payable under the Advisory Agreements would have been obtained through arm's length negotiations. The Board therefore concluded that the Advisory Agreements were in the best interests of each Fund and its shareholders and approved the Advisory Agreements.
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, 2003 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 Board, 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.
Purchase 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 AIM 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, AIM Distributors, and AIM Funds Management Inc. (the sub-advisor to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund) 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.
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy voting for securities held by each Fund to AIM Funds Management, Inc., the "Sub-Advisor". The Sub-Advisor will vote such proxies in accordance with its proxy policies and procedures, which have been reviewed and approved by the Board, and which are found in Appendix D.
Any material changes to the proxy policies and procedures will be submitted to the Board for approval. The Board will be supplied with a summary quarterly report of each Fund's proxy voting record.
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 E. 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 200 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. The Advisory Agreement provides that, in fulfilling its responsibilities, AIM may engage the services of other investment managers with respect to one or more of the Funds. The investment advisory services of AIM and the investment sub-advisory services of the Sub-Advisor to the Funds are not exclusive and AIM and the Sub-Advisor(s) are free to render investment advisory services to others, including other investment companies.
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 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, 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 the 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 Trimark Endeavor Fund First $1 billion 0.80%
On amounts thereafter 0.75%
AIM Trimark Fund First $1 billion 0.85%
AIM Trimark Small Companies Fund On amounts thereafter 0.80%
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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. Termination of this agreement requires approval by the Board. See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies."
INVESTMENT SUB-ADVISOR
AIM has entered into a Sub-Advisory Agreement with the Sub-Advisor to provide investment sub-advisory services to AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund.
The Sub-Advisor is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
The Sub-Advisor is located at, 5140 Yonge Street, Suite 900, Toronto, Ontario M2N 6X7 and has provided investment management and/or administrative services to pension funds, insurance funds, unit trusts, offshore funds and a variety of institutional accounts since 1981.
AIM and the Sub-Advisor are indirect wholly owned subsidiaries of AMVESCAP PLC (formerly, AMVESCO PLC and INVESCO PLC).
For the services to be rendered by the Sub-Advisor under the Sub-Advisory Agreement, AIM will pay to the Sub-Advisor a fee which will be computed daily and paid as of the last day of each month on the basis of each Fund's daily net asset value, using for each daily calculation the most recently determined net asset value of each Fund. (See "Computation of Net Asset Value.") On an annual basis, the sub-advisory fee is equal to 40% of AIM's compensation in respect of the sub-advised assets per year, for each of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund.
Each Fund commenced operations on November 4, 2003. The Funds did not pay management fees prior to that date.
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 Board, 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. 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.
Each Fund commenced operations on November 4, 2003. The Funds did not pay administrative services fees prior to that date.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS") (formerly A I M Fund Services, Inc.), 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 AIS provides that AIS will perform certain shareholder services for the Funds. The Transfer Agency and Service Agreement provides that AIS 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. AIS 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.
AIS has contractually agreed to limit transfer agent fees to 0.10% of average net assets of the Institutional Class. The expense limitation agreement is in effect through December 31, 2004.
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 purchases of shares of the Funds. 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 has selected PricewaterhouseCoopers LLP, 1201 Louisiana Street, 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
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor 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.
Each Fund commenced operations on November 4, 2003. The Funds did not pay brokerage commissions prior to that date.
COMMISSIONS
Each Fund commenced operations on November 4, 2003. The Funds did not pay brokerage commissions to brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities prior to that date.
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 certain other Funds or accounts (and may invest in Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards 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 providing electronic communications of trade information, providing custody services, as well as providing equipment used to communicate research information, and providing specialized consultations with AIM personnel with respect to computerized systems and data furnished to AIM as a component of other research services, arranging meetings with management of companies, and providing access to consultants who supply research information.
The outside research assistance is useful to AIM since the broker-dealers used by AIM tend to provide a more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. 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 brokerage 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 and (2) the research services provided by the broker. Portfolio transactions also may be effected through broker-dealers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients. AIM will not enter into a binding commitment with brokers to place trades with such brokers involving brokerage commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Each Fund commenced operations on November 4, 2003. The Fund did not pay directed brokerage (research services) prior to that date.
REGULAR BROKERS OR DEALERS
Each Fund commenced operations on November 4, 2003. The Funds did not acquire securities of their regular brokers or dealers prior to that date.
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
On occasion, when the Sub-Advisor is purchasing certain thinly-traded securities or shares in an IPO for AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund, the situation may arise that the Sub-Advisor is unable to obtain sufficient securities to fill the orders of the Fund or all other relevant clients. In that situation, the Sub-Advisor is required to use pro-rata allocation methods that ensure the fair and equitable treatment of all clients.
The requirement of pro-rata allocation is subject to limited exceptions - such as when the Fund is subject to special investment objectives or size constraints on investment positions.
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 AIM Investment 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 AIS.
Purchase and redemption orders must be received in good order. To be in good order, the financial intermediary must give AIS 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 AIS for correction of transactions involving Fund shares. If AIS 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 AIS, an investor may change the bank account designated to receive redemption proceeds. AIS may request additional documentation.
AIS 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."
ABANDONED PROPERTY. It is the responsibility of the investor to ensure that AIS 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 AIS. Upon receiving returned mail, AIS will attempt to locate the investor or rightful owner of the account. If unsuccessful, AIS 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. AIS 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
Shares of the Institutional Class of a Fund are offered 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. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statements due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
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; generally 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. 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. 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 each 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 such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds.
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
Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). A Fund may make a redemption in kind, for instance, if a cash redemption would disrupt its operations or performance. Securities delivered as payment in redemptions in kind will be 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 transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. 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.
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 28% of redemption payments and reportable dividends (whether paid or accrued) in the case of any shareholder who fails to provide the Fund with a taxpayer identification number ("TIN") and a certification that he is not subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund;
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 AIS 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. 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 tax.
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 (to the extent discussed below) in the case of corporate shareholders and will be included in the qualified dividend income of noncorporate shareholders. See "Fund Distributions" below.
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. In certain cases a fund may make an election to treat such gains or loss as capital.
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 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 or be less than its book income. Accordingly, the amount which must be distributed to shareholders and which will be taxed to shareholders as ordinary income, qualified dividend 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, 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 and character 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 and as qualified dividend income for individuals and other noncorporate taxpayers 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 15% 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.
Ordinary income dividends paid by a Fund to individuals and other noncorporate taxpayers will be treated as qualified dividend income that is subject to tax at a maximum rate of 15% to the extent of the amount of qualifying dividends received by the Fund from domestic corporations and from foreign corporations that are either incorporated in a possession of the United States, or are eligible for benefits under certain income tax treaties with the United States that include an exchange of information program. In addition, qualifying dividends include dividends paid with respect to stock of a foreign corporation that is readily tradable on an established securities market in the United States. However, dividends received by the Fund from foreign personal holding companies, foreign investment companies or PFICs are not qualifying dividends. If the qualifying dividend income received by a Fund is equal to 95% (or a greater
percentage) of the Fund's gross income (exclusive of net capital gain) in any taxable year, all of the ordinary income dividends paid by the Fund will be qualifying dividend income.
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. However, the AMT on capital gain dividends and qualified dividend income paid by a Fund to a noncorporate shareholder may not exceed a maximum rate of 15%. 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 dividends 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 are not made from 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.
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 under the wash sale rules 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 15%. 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.
BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable distributions and/or redemption payments. 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 28% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless such shareholders furnish the Fund with proper notification of their foreign status.
Foreign 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 adviser 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, and the portion of foreign source income consisting of qualified dividend income is reduced by approximately 57% to account for the tax rate differential. 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 August 23, 2004. 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, qualified dividend 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 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 made at the beginning of the one, five and
ten year periods at the end of the one, five or ten
year periods (or fractional portion of such
period).
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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 Institutional Class shares does not reflect a deduction of any sales charge since that class is 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.
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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.
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Calculation of Certain Performance Data
The Funds may use a restated or a blended performance calculation to derive certain performance data shown for their Institutional Class shares in this Statement of Additional Information and in the Funds' advertisements and other sales material. If the Funds' Institutional Class 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 and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Institutional Class 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' Institutional Class shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to inception of the Institutional Class shares) at net asset value and reflecting the Rule 12b-1 fees applicable to the Class A shares. If the Funds' Institutional Class shares were offered to the public during the entire performance period covered, the performance data shown will be the historical performance of the Funds' Institutional Class 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 cumulataive 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.
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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.
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
DR 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 and redemption.
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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.
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.
Certain Funds may participate in the initial public offering (IPO) market in some market cycles. Because of these Funds' small asset bases, any investment the Funds may make in IPOs may significantly affect these Funds' total returns. As the Funds' assets grow, the impact of IPO investments will decline, which may reduce the effect of IPO investments on the Funds' total returns.
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 Financial World New York Times Barron's Forbes Pension World Best's Review Fortune Pensions & Investments Bloomberg Hartford Courant Inc. Personal Investor Broker World Institutional Investor Philadelphia Inquirer Business Week Insurance Forum The Bond Buyer Changing Times Insurance Week USA Today Christian Science Monitor Investor's Business Daily U.S. News & World Report Consumer Reports Journal of the American Wall Street Journal Economist Society of CLU & ChFC Washington Post FACS of the Week Kiplinger Letter CNN Financial Planning Money CNBC Financial Product News Mutual Fund Forecaster PBS Financial Services Week Nation's Business |
Each Fund may also compare its performance to performance data of similar mutual funds as published by the following services:
Bank Rate Monitor Morningstar, Inc. Bloomberg Standard & Poor's Factset Data Systems Strategic Insight Lipper, Inc. Thompson Financial |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Russell 1000 REGISTERED TRADEMARK Index Russell 2000 REGISTERED TRADEMARK Index Russell 3000 REGISTERED TRADEMARK Index Russell Midcap REGISTERED TRADEMARK 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.
REGULATORY INQUIRIES AND PENDING LITIGATION
The mutual fund industry as a whole is currently subject to regulatory inquires and litigation related to a wide range of issues. These issues include, among others, market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to Section 529 college savings plans.
As described in the prospectuses for the AIM and INVESCO Funds, INVESCO Funds Group, Inc. ("IFG"), the former investment advisor to the INVESCO Funds and an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"), is the subject of three regulatory actions concerning market timing activity in the INVESCO Funds.
In addition, as described more fully below, IFG, AIM, certain related entities, certain of their current and former officers and/or certain of the AIM and INVESCO Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those described above.
As described more fully below, civil lawsuits related to many of the above issues have been filed against (depending upon the lawsuit) IFG, AIM, certain related entities, certain of their current and former officers, and/or certain of the AIM and INVESCO Funds and/or their trustees.
Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. Additional regulatory inquiries related to the above or other issues also may be received by the AIM and INVESCO Funds, IFG, AIM and/or related entities and individuals in the future. This statement of additional information will be supplemented periodically to disclose any such additional regulatory actions, civil lawsuits and regulatory inquiries. Also, this statement of additional information will be supplemented periodically to disclose developments with respect to the three regulatory actions concerning market timing activity in the INVESCO Funds that are described in the AIM and INVESCO Funds' prospectuses.
Regulatory Inquiries Concerning IFG
IFG, certain related entities, certain of their current and former officers and/or certain of the INVESCO Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more INVESCO Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, and investments in securities of other registered investment companies. These regulators include the Securities and Exchange Commission ("SEC"), the NASD, Inc. ("NASD"), the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Attorney General of the State of West Virginia, the West Virginia Securities Commission, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG and certain of these other parties also have received more limited inquiries from the United States Department of Labor ("DOL") and the United States Attorney's Office for the Southern District of New York, some of which concern one or more INVESCO Funds.
Regulatory Inquiries Concerning AIM
AIM, certain related entities, certain of their current and former officers and/or certain of the AIM Funds have received regulatory inquiries in the form of subpoenas or other oral or written requests for information and/or documents related to one or more of the following issues, some of which concern one or more AIM Funds: market timing activity, late trading, fair value pricing, excessive or improper advisory and/or distribution fees, mutual fund sales practices, including revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies and issues related to
Section 529 college savings plans. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of New York ("NYAG"), the Commissioner of Securities for the State of Georgia, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the DOL, the Internal Revenue Service, the United States Attorney's Office for the Southern District of New York, the United States Attorney's Office for the Central District of California, the United States Attorney's Office for the District of Massachusetts, the Massachusetts Securities Division and the U.S. Postal Inspection Service, some of which concern one or more AIM Funds.
Private Civil Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, A I M
Management Group Inc. ("AIM Management"), AMVESCAP, certain related entities
and/or certain of their current and former officers) making allegations
substantially similar to the allegations in the three regulatory actions
concerning market timing activity in the INVESCO Funds that have been filed by
the SEC, the NYAG and the State of Colorado against these parties. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits were initiated in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees. A list identifying such lawsuits that have been
served on IFG or AIM, or for which service of process has been waived, as of
July 14, 2004 is set forth in Appendix G-1.
The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. All such cases against IFG and the other AMVESCAP defendants filed to date have been conditionally or finally transferred to the District of Maryland in accordance with the Panel's directive. In addition, the proceedings initiated in state court have been removed by IFG to Federal court and transferred to the District of Maryland. The plaintiff in one such action continues to seek remand to state court.
Private Civil Actions Alleging Improper Use of Fair Value Pricing
Multiple civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and/or AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) common law breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix G-2.
Private Civil Actions Alleging Excessive Advisory and Distribution Fees
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), A I M Distributors, Inc. ("AIM Distributors") and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of
these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix G-3.
Private Civil Actions Alleging Improper Distribution Fees Charged to Closed Funds
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM and/or AIM Distributors) alleging that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; and (ii) breach of fiduciary duty. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix G-4.
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") and/or certain of the trustees of the AIM and INVESCO Funds) alleging that the defendants improperly used the assets of the AIM and INVESCO Funds to pay brokers to aggressively push the AIM and INVESCO Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG or AIM, or for which service of process has been waived, as of July 14, 2004 is set forth in Appendix G-5.
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 LONG-TERM DEBT RATINGS
Moody's corporate ratings areas follows:
AAa: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds and preferred stock 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 in Aa rated bonds appear somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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 and preferred stock 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. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade , to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt 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, may 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 (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require 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: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt.
Aaa: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Baa: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. 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 MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features.
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 superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation 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.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal 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 meet its financial commitments 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 exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
NR: Not Rated.
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 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.
These 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 rated 'B' 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 rated 'D' 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 Standard & Poor's believes such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks
unique to notes. Notes due 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 it will be treated as a note); and source of payment
(the more dependant the issue is on the market for its refinancing, the more
likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is 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.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns, governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood of
getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues 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 credit and research 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 of any security.
The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the program concerned; it should not be assumed that these ratings apply to every issue made under the program. In particular, in the case of non-standard issues, i.e., those that are linked to the credit of a third party or linked to the performance of an index, ratings of these issues may deviate from the applicable program rating.
Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events.
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 good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity.
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.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of 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," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
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 are valued on the basis of their prospects for achieving partial or full 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 categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
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 in the case of the higher 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 result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment default.
APPENDIX B
TRUSTEES AND OFFICERS
As of May 31, 2004
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 112 portfolios in the AIM and INVESCO Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with any predecessor entities, if any.
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
------------------------- ------- ---------------------------------------------- ---------------
INTERESTED PERSONS
Robert H. Graham(1) -- 1946 1998 Director and Chairman, A I M Management Group None
Trustee, Chairman and President Inc. (financial services holding company);
Director and Vice Chairman,
AMVESCAP PLC and Chairman of
AMVESCAP PLC - AIM Division (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);
Director and Chairman, A I M
Capital Management, Inc.
(registered investment advisor), A
I M Distributors, Inc. (registered
broker dealer), AIM Investment
Services, Inc. (registered transfer
agent), and Fund Management Company
(registered broker dealer); and
Chief Executive Officer, AMVESCAP
PLC - Managed Products
Mark H. Williamson(2) -- 1951 2003 Director, President and Chief Executive Officer, None
Trustee and Executive Vice A I M Management Group Inc. (financial services
President holding company); Director, Chairman and
President, A I M Advisors, Inc.
(registered investment advisor);
Director, A I M Capital Management,
Inc. (registered investment
advisor) and A I M Distributors,
Inc. (registered broker dealer);
Director and Chairman, AIM
Investment Services, Inc.
(registered transfer agent) and
Fund Management Company (registered
broker dealer) and INVESCO
Distributors, Inc. (registered
broker dealer); and Chief Executive
Officer, AMVESCAP PLC - AIM
Division (parent of AIM and a
global investment management firm)
Formerly: Director, Chairman,
President and Chief Executive
Officer, INVESCO Funds Group, Inc.;
President and Chief Executive
Officer, INVESCO Distributors,
Inc.; Chief Executive Officer,
AMVESCAP PLC - Managed Products;
Chairman and Chief Executive
Officer of
|
(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
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
------------------------- ------- ------------------------------------------- ---------------
NationsBanc Advisors, Inc.; and
Chairman of NationsBanc
Investments, Inc.
INDEPENDENT TRUSTEES
Bob R. Baker - 1936 2003 Retired None
Trustee Formerly: President and Chief Executive
Officer, AMC Cancer Research Center; and
Chairman and Chief Executive Officer, First
Columbia Financial Corporation
Frank S. Bayley -- 1939 1987 Retired Badgley Funds, Inc.
Trustee Formerly: Partner, law firm of Baker & McKenzie (registered
investment company)
James T. Bunch - 1942 2003 Co-President and Founder, Green, Manning & Bunch None
Trustee Ltd., (investment banking firm); and Director,
Policy Studies, Inc. and Van Gilder Insurance
Corporation
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 of a number of public and private Cortland Trust,
Trustee business corporations, including the Boss Group, Inc. (Chairman)
Ltd. (private investment and management) and (registered investment
Magellan Insurance Company company); Annuity and
Formerly: Director, President and Chief Life Re (Holdings), Ltd.
Executive Officer, Volvo Group North (insurance company)
America, Inc.; Senior Vice President, AB
Volvo; and director of various affiliated
Volvo companies
Edward K. Dunn, Jr. -- 1935 2001 Retired None
Trustee Formerly: Chairman, Mercantile Mortgage 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; and
Trustee Group, Inc. (government affairs company) and Discovery Global
Texana Timber LP (sustainable forestry company) Education Fund
(non-profit)
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Trustee Frankel LLP Inc. (registered
investment company)
|
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
------------------------- ------- ---------------------------------------------- -----------------
Gerald J. Lewis - 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.,
Formerly: Associate Justice of the California
Court of Appeals
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 1987 Retired None
Trustee
Louis S. Sklar -- 1939
Trustee 2001 Executive Vice President, Development and None
Operations, Hines Interests Limited Partnership
(real estate development company)
Larry Soll - 1942 2003 Retired None
Trustee
OTHER OFFICERS
Kevin M. Carome - 1956 2003 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc.
Legal Officer and Secretary (financial services holding company) and A I M
Advisors, Inc.; Director and Vice President,
INVESCO Distributors, Inc.; Vice President,
A I M Capital Management, Inc.,
A I M Distributors, Inc. and AIM
Investment Services, Inc.; and
Director, Vice President and
General Counsel, Fund Management
Company
Formerly: Senior Vice President
and General Counsel, Liberty
Financial Companies, Inc.; and
Senior Vice President and General
Counsel, Liberty Funds Group, LLC
Stuart W. Coco -- 1955 2002 Managing Director and Director of Money Market N/A
Vice President Research and Special Projects, 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, AIM Investment
Services, Inc.
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, N/A
Vice President and A I M Advisors, Inc.
Treasurer Formerly: Senior Vice President, AIM Investment
Services, Inc.; Vice President, A I M
Distributors, Inc.
|
TRUSTEE
NAME, YEAR OF BIRTH AND AND/OR OTHER
POSITION(S) HELD WITH THE OFFICER TRUSTEESHIP(S)
TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE
------------------------- ------- ------------------------------------------- ---------------
Karen Dunn Kelley - 1960 2004 Director of Cash Management, Managing Director N/A
Vice President and Chief Cash Management Officer,
A I M Capital Management, Inc.;
Director and President, Fund
Management Company; and Vice
President, A I M Advisors, Inc.
Edgar M. Larsen -- 1940 2002 Director and Executive Vice President, A I M N/A
Vice President Management Groups Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and Director,
Chairman, President, Director of Investments,
Chief Executive Officer and Chief Investment
Officer, A I M Capital Management, Inc.
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2003
AGGREGATE DOLLAR RANGE OF EQUITY
SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
DOLLAR RANGE OF EQUITY SECURITIES TRUSTEE IN THE AIM FAMILY OF
NAME OF TRUSTEE PER FUND FUNDS REGISTERED TRADEMARK
--------------- --------------------------------- --------------------------------
Robert H. Graham AIM Developing Markets Fund 1 - $10,000 Over $100,000
AIM Libra Fund $1 - $10,000
Mark H. Williamson AIM Libra Fund $10,001 - $50,000 Over $100,000
Bob R. Baker -0- Over $100,000
Frank S. Bayley AIM Developing Markets Fund $1 - $10,000 $50,001 - $100,000
James T. Bunch -0- Over $100,000
Bruce L. Crockett -0- $10,001 - $50,000
Albert R. Dowden -0- Over $100,000
Edward K. Dunn, Jr. -0- Over $100,000(3)
Jack M. Fields -0- Over $100,000(3)
Carl Frischling -0- Over $100,000(3)
Gerald J. Lewis -0- $50,001 - $100,000
Prema Mathai-Davis -0- $1 - $10,000(3)
Lewis F. Pennock -0- $50,001 - $100,000
Ruth H. Quigley AIM Developing Markets Fund $1 - $10,000 $1 - $10,000
Louis S. Sklar -0- Over $100,000(3)
Larry Soll -0- Over $100,000
|
(3) 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 and/or INVESCO 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, 2003:
ESTIMATED
ANNUAL
BENEFITS
UPON TOTAL
RETIREMENT RETIREMENT COMPENSATION
AGGREGATE BENEFITS FROM ALL AIM FROM ALL AIM
COMPENSATION ACCRUED FUNDS AND FUNDS AND
FROM THE BY ALL INVESCO INVESCO
TRUSTEE TRUST(1) AIM FUNDS(2) FUNDS(3) FUNDS(4)
------- ------------ ------------ ------------ ------------
Bob R. Baker(5) $ 0 $32,635 $114,131 $154,554
Frank S. Bayley 6,967 131,228 90,000 159,000
James T. Bunch(5) 0 20,436 90,000 138,679
Bruce L. Crockett 7,013 46,000 90,000 160,000
Albert R. Dowden 6,967 57,716 90,000 159,000
Edward K. Dunn, Jr. 7,013 94,860 90,000 160,000
Jack M. Fields 6,971 28,036 90,000 159,000
Carl Frischling(6) 7,013 40,447 90,000 160,000
Gerald J. Lewis(5) 0 20,436 90,000 142,054
Prema Mathai-Davis 7,013 33,142 90,000 160,000
Lewis F. Pennock 7,013 49,610 90,000 160,000
Ruth H. Quigley 7,013 126,050 90,000 160,000
Louis S. Sklar 7,013 72,786 90,000 160,000
Larry Soll(5) 0 48,830 108,090 140,429
|
(1) Amounts shown are based on the fiscal year ended October 31, 2003. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended October 31, 2003, including earnings was $23,499.
(2) During the fiscal year ended October 31, 2003, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $21,910.
(3) These amounts represent the estimated annual benefits payable by the AIM Funds and INVESCO Funds upon the trustee's retirement. These estimated benefits assume each trustee serves until his or her normal retirement date and has ten years of service.
(4) All trustees currently serve as trustees of 19 registered investment companies advised by AIM.
(5) Messrs. Baker, Bunch, Lewis and Dr. Soll were elected trustee of the Trust on October 21, 2003 and therefore received no compensation from the Trust during the fiscal year ended October 31, 2003.
(6) During the fiscal year ended October 31, 2003, the Trust paid $14,812 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
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
DECEMBER 1, 2003
PURPOSE AND BACKGROUND
In its trusteeship and management of mutual funds, AIM Trimark acts as fiduciary to the unitholders and must act in their best interests.
APPLICATION
AIM Trimark will make every effort to exercise all voting rights with respect to securities held in the mutual funds that it manages in Canada or to which it provides sub-advisory services, including a Fund registered under and governed by the US Investment Company Act of 1940, as amended (the "US Funds") (collectively, the "Funds"). Proxies for the funds distributed by Aim Trimark Investments and managed by an affiliate or a third party (a "Sub-Advisor") will be voted in accordance with the Sub-Advisor's policy, unless the sub-advisory agreement provides otherwise.
The portfolio managers have responsibility for exercising all proxy votes and in doing so, for acting in the best interest of the Fund. Portfolio managers must vote proxies in accordance with the Guidelines, as amended from time to time, a copy of which is attached to this policy.
When a proxy is voted against management's recommendation, the portfolio manager will provide to the CIO the reasons in writing for any vote in opposition to management's recommendation.
AIM Trimark may delegate to a third party the responsibility to vote proxies on behalf of all or certain Funds, in accordance with the Guidelines.
RECORDS MANAGEMENT
The Investment Department will endeavor to ensure that all proxies and notices are received from all issuers on a timely basis, and will maintain for all Funds
- A record of all proxies received;
- a record of votes cast;
- a copy of the reasons for voting against management; and
for the US Funds
- the documents mentioned above; and
- a copy of any document created by AIM Trimark that was material to making a decision how to vote proxies on behalf of a US Fund and that memorializes the basis of that decision.
If AIM Trimark relies on a third party to vote proxies, the third party shall retain on behalf of AIM Trimark
- a copy of the proxy statements; and
- a record of the vote cast
and the third party shall undertake to provide AIM Trimark with a copy of the proxy statements and the record promptly upon request.
All documents must be maintained and preserved in an easily accessible place i) for a period of 2 years where AIM Trimark carries on business in Canada and ii) for a period of 3 years thereafter at the same
location or at any another location. If proxy voting has been delegated to a third party, the proxy statements and record of the vote cast must be available to Aim Trimark for a period of 6 years.
REPORTING
The CIO will report on proxy voting to the Fund Boards on an annual basis with respect to all Funds managed in Canada except the US Funds. The CIO will report on proxy voting to the Board of Directors of the US Funds as required from time to time.
Compliance will review the proxy voting records held by AIM Trimark on an annual basis.
AIM TRIMARK INVESTMENTS
PROXY VOTING GUIDELINES
PURPOSE
The purpose of this document is to describe AIM Trimark's general guidelines for voting proxies received from companies held in AIM Trimark's Toronto-based funds. Proxy voting for the funds managed on behalf of AIM Trimark on a sub-advised basis (i.e. by other AMVESCAP business units or on a third party basis) are subject to the proxy voting policies & procedures of those other entities. As part of its regular due diligence, AIM Trimark will review the proxy voting policies & procedures of any new sub-advisors to ensure that they are appropriate in the circumstances.
INTRODUCTION
AIM Trimark has the fiduciary obligation to ensure that the long-term economic best interest of unitholders is the key consideration when voting proxies of portfolio companies.
As a general rule, AIM Trimark shall vote against any actions that would:
- reduce the rights or options of shareholders,
- reduce shareholder influence over the board of directors and management,
- reduce the alignment of interests between management and shareholders, or
- reduce the value of shareholders' investments.
At the same time, since AIM Trimark's Toronto-based portfolio managers follow an investment discipline that includes investing in companies that are believed to have strong management teams, the portfolio managers will generally support the management of companies in which it invests, and will accord proper weight to the positions of a company's board of directors. Therefore, in most circumstances, votes will be cast in accordance with the recommendations of the company's board of directors.
While AIM Trimark's proxy voting guidelines are stated below, the portfolio managers will take into consideration all relevant facts and circumstances (including country specific considerations), and retain the right to vote proxies as deemed appropriate.
These guidelines may be amended from time to time.
CONFLICTS OF INTEREST
When voting proxies, AIM Trimark's portfolio managers assess whether there are material conflicts of interest between AIM Trimark's interests and those of unitholders. A potential conflict of interest situation may include where AIM Trimark or an affiliate manages assets for, provides other financial services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote in favour of management of the company may harm AIM Trimark's relationship with the company. In all situations, the portfolio managers will not take AIM Trimark's relationship with the company into account, and will vote the proxies in the best interest of the unitholders. To the extent that a portfolio manager has any conflict of interest with respect to a company or an issue presented, that portfolio manager should abstain from voting on that company or issue.
BOARDS OF DIRECTORS
We believe that a board that has at least a majority of independent directors is integral to good corporate governance. Unless there are restrictions specific to a company's home jurisdiction, key board committees, including audit and compensation committees, should be completely independent.
VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Votes in an uncontested election of directors are evaluated on a case-by-case basis, considering factors that may include:
- Long-term company performance relative to a market index,
- Composition of the board and key board committees,
- Nominee's attendance at board meetings,
- Nominee's investments in the company,
- Whether the chairman is also serving as CEO, and
- Whether a retired CEO sits on the board.
VOTING ON DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Votes in a contested election of directors are evaluated on a case-by-case basis, considering factors that may include:
- Long-term financial performance of the target company relative to its industry,
- Management's track record,
- Background to the proxy contest,
- Qualifications of director nominees (both slates),
- Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met, and
- Stock ownership positions.
REIMBURSEMENT OF PROXY SOLICITATION EXPENSES
Decisions to provide reimbursement for dissidents waging a proxy contest are made on a case-by-case basis.
SEPARATING CHAIRMAN AND CEO
Shareholder proposals to separate the chairman and CEO positions should be evaluated on a case-by-case basis.
While we generally support these proposals, some companies have governance structures in place that can satisfactorily counterbalance a combined position. Voting decisions will take into account factors such as:
- Designated lead director, appointed from the ranks of the independent board members with clearly delineated duties;
- Majority of independent directors;
- All-independent key committees;
- Committee chairpersons nominated by the independent directors;
- CEO performance is reviewed annually by a committee of outside directors; and
- Established governance guidelines.
MAJORITY OF INDEPENDENT DIRECTORS
While we generally support shareholder proposals asking that a majority of directors be independent, each proposal should be evaluated on a case-by-case basis.
We generally vote for shareholder proposals that request that the board's audit, compensation, and/or nominating committees be composed exclusively of independent directors.
STOCK OWNERSHIP REQUIREMENTS
We believe that individual directors should be appropriately compensated and motivated to act in the best interests of shareholders. Share ownership by directors better aligns their interests with those of other shareholders. Therefore, we believe that meaningful share ownership by directors is in the best interest of the company.
We generally vote for proposals that require a certain percentage of a director's compensation to be in the form of common stock.
SIZE OF BOARDS OF DIRECTORS
We believe that the number of directors is important to ensuring the board's effectiveness in maximizing long-term shareholder value. The board must be large enough to allow it to adequately discharge its responsibilities, without being so large that it becomes cumbersome.
While we will we prefer a board of no fewer than 5 and no more than 16 members, each situation will be considered on a case-by-case basis taking into consideration the specific company circumstances.
CLASSIFIED OR STAGGERED BOARDS
In a classified or staggered board, directors are typically elected in two or more "classes", serving terms greater than one year.
We prefer the annual election of all directors and will generally not support proposals that provide for staggered terms for board members. We recognize that there may be jurisdictions where staggered terms for board members is common practice and, in such situations, we will review the proposals on a case-by-case basis.
DIRECTOR INDEMNIFICATION AND LIABILITY PROTECTION
We recognize that many individuals may be reluctant to serve as corporate directors if they were to be personally liable for all lawsuits and legal costs. As a result, limitations on directors' liability can benefit the corporation and its shareholders by helping to attract and retain qualified directors while providing recourse to shareholders on areas of misconduct by directors.
We generally vote for proposals that limit directors' liability and provide indemnification as long as the arrangements are limited to the director acting honestly and in good faith with a view to the best interests of the corporation and, in criminal matters, are limited to the director having reasonable grounds for believing the conduct was lawful.
AUDITORS
A strong audit process is a requirement for good corporate governance. A significant aspect of the audit process is a strong relationship with a knowledgeable and independent set of auditors.
RATIFICATION OF AUDITORS
We believe a company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of impaired independence.
We generally vote for the reappointment of the company's auditors unless:
It is not clear that the auditors will be able to fulfill their function;
There is reason to believe the auditors have rendered an opinion that is neither accurate nor indicative of the company's financial position; or
The auditors have a significant professional or personal relationship with the issuer that compromises their independence.
DISCLOSURE OF AUDIT VS. NON-AUDIT FEES
Understanding the fees earned by the auditors is important for assessing auditor independence. Our support for the re-appointment of the auditors will take into consideration whether the management information circular contains adequate disclosure about the amount and nature of audit vs. non-audit fees.
There may be certain jurisdictions that do not currently require disclosure of audit vs. non-audit fees. In these circumstances, we will generally support proposals that call for this disclosure.
COMPENSATION PROGRAMS
Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders' ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider each compensation plan in its entirety (including all incentives, awards and other compensation) to determine if the plan provides the right incentives to managers and directors and is reasonable on the whole.
The following are specific guidelines dealing with some of the more common features of compensation programs (features not specifically itemized below will be considered on a case-by-case basis taking into consideration the general principles described above):
CASH COMPENSATION AND SEVERANCE PACKAGES
We will generally support the board's discretion to determine and grant appropriate cash compensation and severance packages.
EQUITY BASED PLANS - DILUTION
We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
EMPLOYEE STOCK PURCHASE PLANS
We will generally vote for the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than
85% of their market value. It is recognized that country specific circumstances may exist (e.g. tax issues) that require proposals to be reviewed on a case-by-case basis.
LOANS TO EMPLOYEES
We will vote against the corporation making loans to employees to allow employees to pay for stock or stock options.
STOCK OPTION PLANS - BOARD DISCRETION
We will vote against stock option plans that give the board broad discretion in setting the terms and conditions of the programs. Such programs should be submitted with detail and be reasonable in the circumstances regarding their cost, scope, frequency and schedule for exercising the options.
STOCK OPTION PLANS - INAPPROPRIATE FEATURES
We will generally vote against plans that have any of the following structural features:
- ability to re-price "underwater" options without shareholder approval,
- ability to issue options with an exercise price below the stock's current market price,
- ability to issue "reload" options, or
- automatic share replenishment ("evergreen") features.
STOCK OPTION PLANS - DIRECTOR ELIGIBILITY
We will generally support stock option plans for directors as long as the terms and conditions of director options are clearly defined and are reasonable.
STOCK OPTION PLANS - REPRICING
We will vote for proposals to re-price options if there is a value-for-value (rather than a share-for-share) exchange.
STOCK OPTION PLANS - VESTING
We will vote against stock option plans that are 100% vested when granted.
STOCK OPTION PLANS - AUTHORIZED ALLOCATIONS
We will generally vote against stock option plans that authorize allocation of 25% or more of the available options to any one individual.
STOCK OPTION PLANS - CHANGE IN CONTROL PROVISIONS
We will vote against stock option plans with change in control provisions that allow option holders to receive more for their options than shareholders would receive for their shares.
STOCK OPTION PLANS - EXPENSING
We will consider proposals that deal with the expensing of the costs associated with stock option plans on a case-by-case basis.
CORPORATE MATTERS
We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers & acquisitions on a case-by-case basis, taking into consideration the impact of
the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company's industry and performance in terms of shareholder returns.
COMMON STOCK AUTHORIZATION
We will review proposals to increase the number of shares of common stock authorized for issue on a case-by-case basis.
DUAL CLASS SHARE STRUCTURES
Dual class share structures involve the creation of a second class of common stock with either superior or inferior voting rights to those of the existing class of stock. Such share structures violates the principle of "one share, one vote", leading to the possibility that the company may take actions or fail to take actions without the support of a true majority of shareholders.
We will generally vote against proposals to create or extend dual class share structures where certain stockholders have superior or inferior voting rights to another class of stock.
STOCK SPLITS
We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company's industry and performance in terms of shareholder returns.
REVERSE STOCK SPLITS
We will vote for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split.
SHARE REPURCHASE PROGRAMS
We will vote against proposals to institute open-market share repurchase plans if all shareholders do not participate on an equal basis.
REINCORPORATION
Reincorporation involves re-establishing the company in a different legal jurisdiction.
We will generally vote for proposals to reincorporate the company provided that the board and management have demonstrated sound financial or business reasons for the move. Proposals to reincorporate will not be supported if solely as part of an anti-takeover defense or as a way to limit directors' liability.
MERGERS & ACQUISITIONS
We will vote for merger & acquisition proposals that the relevant portfolio managers believe, based on their review of the materials:
- will result in financial and operating benefits,
- have a fair offer price,
- have favourable prospects for the combined companies, and
- will not have a negative impact on corporate governance or shareholder rights.
SHAREHOLDER PROPOSALS
We recognize that to effectively manage a corporation, directors and management must consider not only the interests of shareholders, but the interests of employees, customers, suppliers, creditors and the general community as well. Shareholder proposals can be extremely complex, and the impact on the interests of all stakeholders can rarely be anticipated with a high degree of confidence.
Shareholder proposals will be reviewed on a case-by-case basis with consideration of factors such as:
- the proposal's impact on the company's short-term and long-term share value,
- its effect on the company's reputation,
- the economic effect of the proposal,
- industry and regional norms applicable to the company,
- the company's overall corporate governance provisions, and
- the reasonableness of the request.
We will generally not support proposals that place arbitrary or artificial constraints on the board, management or the company.
ORDINARY BUSINESS PRACTICES
We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
PROTECTION OF SHAREHOLDER RIGHTS
We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company's corporate governance standards indicate that such additional protections are warranted.
BARRIERS TO SHAREHOLDER ACTION
We will generally vote for proposals to lower barriers to shareholder action.
SHAREHOLDER RIGHTS PLANS
We will generally vote for proposals to subject shareholder rights plans to a shareholder vote.
OTHER
We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
We will vote against any proposals to authorize the company to conduct any other business that is not described in the proxy statement.
APPENDIX E
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 August 2, 2004.
AIM DEVELOPING MARKETS FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------- ------------------- -------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------- ------------------- ------------------- -------------------
Citigroup Global Markets House Account 12.99% 5.01% 6.56%
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street
NY, NY 10001-2402
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor 6.17% 5.65% 21.70%
Jacksonville, FL 32246-6484
Morgan Stanley DW -- 6.02% --
Attn: Mutual Fund Operations
3 Harborside Pl, Floor 6
Jersey City, NJ 07311-3907
|
AIM GLOBAL HEALTH CARE FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------- ------------------- -------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------- ------------------- ------------------- -------------------
Citigroup Global Markets House Account 7.44% 6.84% --
Attn: Cindy Tempesta, 7th Floor
333 West 34th Street
New York, NY 10001-2402
|
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------- ------------------- -------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------- ------------------- ------------------- -------------------
Merrill Lynch Pierce Fenner & Smith 7.61% 5.79% 11.89%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
|
AIM LIBRA FUND
CLASS A SHARES CLASS B SHARES CLASS C SHARES
------------------- ------------------- -------------------
NAME AND ADDRESS OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF PERCENTAGE OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD
-------------------------------------- ------------------- ------------------- -------------------
Charles T. Bauer 15.72%(1) -- --
c/o AIM Management Group Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1113
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration 21.16% 18.63% 51.62%
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Jonathan C. Schoolar Sep.Prop. 6.04%(1) -- --
6640 Dogwood Creek
Austin, TX 78746-1318
|
AIM TRIMARK FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
---------------- ---------------- ---------------- ---------------- ----------------
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
-------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
A I M Advisors, Inc.(1) -- 8.34% 8.47% 100.00% 100.00%
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103
Merrill Lynch Pierce Fenner & Smith
FBO The Sole Benefit of Customers
Attn: Fund Administration -- 8.29% 6.62% -- --
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Morgan Stanley DW -- -- 7.35%
Attn Mutual Fund Operations
3 Harborside Pl, Floor 6
Jersey City, NJ 07311-3907
|
AIM TRIMARK ENDEAVOR FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
---------------- ---------------- ---------------- ---------------- ----------------
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
-------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
A I M Advisors, Inc.(1) -- 7.75% 9.07% 100.00% --
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103
AIM Conservative Asset Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz, Suite 100 -- -- -- -- 98.09%
Houston, TX 77046-1113
Merrill Lynch Pierce Fenner & Smith 36.09% -- 51.17% -- --
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
|
AIM TRIMARK SMALL COMPANIES FUND
INSTITUTIONAL
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS R SHARES CLASS SHARES
---------------- ---------------- ---------------- ---------------- ----------------
NAME AND ADDRESS OF PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED PERCENTAGE OWNED
PRINCIPAL HOLDER OF RECORD OF RECORD OF RECORD OF RECORD OF RECORD
-------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
A I M Advisors, Inc.(1) -- 8.80% 13.90% -- --
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046-1103
Merrill Lynch Pierce Fenner & Smith
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr East 6.14% -- 18.55% -- --
2nd Floor
Jacksonville, FL 32246-6484
AIM Moderate Asset Allocation Fund
Omnibus Account
c/o AIM Advisors
11 E. Greenway Plz, Suite 100 -- -- -- -- 99.51%
Houston, TX 77046-1113
Bird Dog Trading -- -- -- 39.30% --
Derek D. Wilson
110 Gray Street
Houston, TX 77002-8500
|
(1) Owned of record and beneficially.
MANAGEMENT OWNERSHIP
As of August 2, 2004, the trustees and officers as a group owned less than 1% of the outstanding shares of each class of each Fund.
APPENDIX F
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
----------------------------------- ------ ------- -------- --------- ---------
AIM Trimark Endeavor Fund(1) N/A N/A N/A 8.80%(2) 11/04/03
AIM Trimark Fund(1) N/A N/A N/A 5.10%(2) 11/04/03
AIM Trimark Small Companies Fund(1) N/A N/A N/A 5.60%(2) 11/04/03
|
CUMULATIVE TOTAL RETURNS
The cumulative total returns 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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
----------------------------------- ------ ------- -------- --------- ---------
AIM Trimark Endeavor Fund(1) N/A N/A N/A 8.80% 11/04/03
AIM Trimark Fund(1) N/A N/A N/A 5.10% 11/04/03
AIM Trimark Small Companies Fund(1) N/A N/A N/A 5.60% 11/04/03
|
AVERAGE ANNUAL TOTAL RETURN (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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
----------------------------------- ------ ------- -------- --------- ---------
AIM Trimark Endeavor Fund(1) N/A N/A N/A 8.80%(2) 11/04/03
AIM Trimark Fund(1) N/A N/A N/A 5.10%(2) 11/04/03
AIM Trimark Small Companies Fund(1) N/A N/A N/A 5.60%(2) 11/04/03
|
(1) Institutional shares were first offered on April 30, 2004. Returns prior to that date are hypothetical results based on Class A share returns at net asset value, adjusted to reflect additional Class R 12b-1 fees. The inception date listed is that of the Class A shares.
(2) Returns are cumulative.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTIONS)
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 April 30, 2004 are as follows:
PERIODS ENDED
APRIL 30, 2004
SINCE INCEPTION
INSTITUTIONAL CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
----------------------------------- ------ ------- -------- --------- ---------
AIM Trimark Endeavor Fund(1) N/A N/A N/A 5.72%(2) 11/04/03
AIM Trimark Fund(1) N/A N/A N/A 3.32%(2) 11/04/03
AIM Trimark Small Companies Fund(1) N/A N/A N/A 3.64%(2) 11/04/03
|
(1) Institutional shares were first offered on April 30, 2004. Returns prior to that date are hypothetical results based on Class A share returns at net asset value, adjusted to reflect additional Class R 12b-1 fees. The inception date listed is that of the Class A shares.
(2) Returns are cumulative.
APPENDIX G
REGULATORY INQUIRIES AND PENDING LITIGATION
APPENDIX G-1
PENDING LITIGATION ALLEGING MARKET TIMING
The following civil lawsuits, including purported class action and shareholder derivative suits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG, AIM, AIM Management, AMVESCAP and/or certain related entities and individuals and are related to the three regulatory actions concerning market timing activity in the INVESCO Funds that have been filed by the SEC, the Attorney General of the State of New York and the State of Colorado against these parties. These lawsuits either have been served or have had service of process waived as of July 14, 2004. All of these lawsuits have been conditionally or finally transferred to the United States District Court for the District of Maryland in accordance with the directive of the Judicial Panel on Multidistrict Litigation (Case No. 04-MD-15864; In Re AIM, Artisan, INVESCO, Strong and T. Rowe Price Mutual Fund Litigation). The plaintiffs in one of these lawsuits (Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc. et al.) continue to seek remand to state court.
RICHARD LEPERA, On Behalf Of Himself And All Others Similarly Situated,
V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., INVESCO BOND
FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE DEFENDANTS 1-100, in
the District Court, City and County of Denver, Colorado, (Civil Action
No. 03-CV-7600), filed on October 2, 2003. This claim alleges: common
law breach of fiduciary duty; common law breach of contract; and common
law tortious interference with contract. The plaintiff in this case is
seeking: compensatory and punitive damages; injunctive relief;
disgorgement of revenues and profits; and costs and expenses, including
counsel fees and expert fees.
MIKE SAYEGH, On Behalf Of The General Public, V. JANUS CAPITAL
CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND,
EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT
MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES
INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE GROUP
MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA CAPITAL
MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND INC., ROBERT
H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND, SECURITY TRUST
COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD & COMPANY, ALLIANCE
CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL MANAGEMENT L.P.,
ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA FINANCIAL INC.,
ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES SCHAFFRAN, MARSH
& MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT
MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES 1-500, in the
Superior Court of the State of California, County of Los Angeles (Case
No. BC304655), filed on October 22, 2003 and amended on December 17,
2003 to substitute INVESCO Funds Group, Inc. and Raymond R. Cunningham
for unnamed Doe defendants. This claim alleges unfair business
practices and violations of Sections 17200 and 17203 of the California
Business and Professions Code. The plaintiff in this case is seeking:
injunctive relief; restitution, including pre-judgment interest; an
accounting to determine the amount to be returned by the defendants and
the amount to be refunded to the public; the creation of an
administrative process whereby injured customers of the defendants
receive their losses; and counsel fees.
RAJ SANYAL, Derivatively On Behalf of NATIONS International Equity
Fund, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER,
CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B.
WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS,
THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B.
CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT,
BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF
AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL MANAGEMENT, LLC, AND
NATIONS FUNDS TRUST, in the Superior Court Division, State of North
Carolina (Civil Action No. 03-CVS-19622), filed on November 14, 2003.
This claim alleges common law breach of fiduciary duty; abuse of
control; gross mismanagement; waste of fund assets; and unjust
enrichment. The plaintiff in this case is seeking: injunctive relief,
including imposition of a constructive trust; damages; restitution and
disgorgement; and costs and expenses, including counsel fees and expert
fees.
L. SCOTT KARLIN, Derivatively On Behalf of INVESCO FUNDS GROUP, INC. V.
AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the
United States District Court, District of Colorado (Civil Action No.
03-MK-2406), filed on November 28, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act of 1940 ("Investment
Company Act"), and common law breach of fiduciary duty. The plaintiff
in this case is seeking damages and costs and expenses, including
counsel fees and expert fees.
RICHARD RAVER, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 03-F-2441), filed on December 2,
2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act of 1933 (the "Securities Act"); Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5
under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of the
Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
JERRY FATTAH, Custodian For BASIM FATTAH, Individually and On Behalf of
All Others Similarly Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES
FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
EQUITY FUND (Formerly known as INTERNATIONAL BLUE CHIP VALUE FUND),
INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR
FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND,
AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO
TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY
FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN
FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH &
INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND,
INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (collectively known as the
"INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM
SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND
FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC.
(collectively known as the "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC,
INVESCO FUNDS GROUP INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS
KOLBE, EDWARD STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC.,
CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY
CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States
District Court, District of Colorado (Civil Action No. 03-F-2456),
filed on December 4, 2003. This claim alleges violations of: Sections
11 and 15 of Securities Act; Sections 10(b) and 20(a) of the Exchange
Act; Rule 10b-5 under the Exchange Act; and Section 206 of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"). The
plaintiffs in this case are seeking: compensatory damages; rescission;
return of fees paid; accounting for wrongfully gotten gains, profits
and compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.
EDWARD LOWINGER AND SHARON LOWINGER, Individually and On Behalf of All
Others Similarly Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
(FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE
FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM
MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO
TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S
TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO
LATIN AMERICAN GROWTH FUND (collectively known as the "INVESCO FUNDS"),
AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (collectively known as
the "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
INC., TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN
MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 03-CV-9634), filed on December 4, 2003. This claim alleges
violations of: Sections 11 and 15 of the Securities Act; Sections 10(b)
and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
JOEL GOODMAN, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in
the District Court, City and County of Denver, Colorado (Case Number
03CV9268), filed on December 5, 2003. This claim alleges common law
breach of fiduciary duty and aiding and abetting breach of fiduciary
duty. The plaintiffs in this case are seeking: injunctive relief;
accounting for all damages and for all profits and any special benefits
obtained; disgorgement; restitution and damages; costs and
disbursements, including counsel fees and expert fees; and equitable
relief.
STEVEN B. EHRLICH, Custodian For ALEXA P. EHRLICH, UGTMA/FLORIDA, AND
DENNY P. JACOBSON, Individually And On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
(collectively known as the "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (collectively known as the "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA
INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
DOES 1-100, in the United States District Court, District of Colorado
(Civil Action No. 03-N-2559), filed on December 17, 2003. This claim
alleges violations of: Sections 11 and 15 of the Securities Act;
Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in
this case are seeking: compensatory damages; rescission; return of fees
paid; accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
JOSEPH R. RUSSO, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURERS
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
(collectively known as the "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (collectively known as the "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER,
RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA
INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
DOES 1-100, in the United States District Court, Southern District of
New York (Civil Action No. 03-CV-10045), filed on December 18, 2003.
This claim alleges violations of: Sections 11 and 15 of the Securities
Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in
this case are seeking: compensatory damages; rescission; return of fees
paid; accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
MIRIAM CALDERON, Individually and On Behalf of All Others Similarly
Situated, v. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC.,
AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER,
JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM,
AND DOES 1-100, in the United States District Court, District of
Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003. This
claim alleges violations of Sections 404, 405 and 406B of the Employee
Retirement Income Security Act ("ERISA"). The plaintiffs in this case
are seeking: declarations that the defendants breached their ERISA
fiduciary duties and that they are not entitled to the protection of
Section 404(c)(1)(B) of ERISA; an order compelling the defendants to
make good all losses to a particular retirement plan described in this
case (the "Retirement Plan") resulting from the defendants' breaches of
their fiduciary duties, including losses to the Retirement Plan
resulting from imprudent investment of the Retirement Plan's assets,
and to restore to the Retirement Plan all profits the defendants made
through use of the Retirement Plan's assets, and to restore to the
Retirement Plan all profits which the participants would have made if
the defendants had fulfilled their fiduciary obligations; damages on
behalf of the Retirement Plan; imposition of a constructive trust,
injunctive relief, damages suffered by the Retirement Plan, to be
allocated proportionately to the participants in the Retirement Plan;
restitution and other costs and expenses, including counsel fees and
expert fees.
PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC. AND
AIM ADVISER, INC., in the United States District Court, District of
Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003.
This claim alleges violations of Sections 15(a), 20(a) and 36(b) of the
Investment Company Act. The plaintiffs in this case are seeking:
rescission and/or voiding of the investment advisory agreements; return
of fees paid; damages; and other costs and expenses, including counsel
fees and expert fees.
LORI WEINRIB, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR
SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN
MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in
the United States District Court, Southern District of New York (Civil
Action No. 04-CV-00492), filed on January 21, 2004. This claim alleges
violations of: Sections 11 and 15 of the 1933 Act; Sections 10(b) and
20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act; and
Section 206 of the Advisers Act. The plaintiffs in this case are
seeking: compensatory damages; rescission; return of fees paid;
accounting for wrongfully gotten gains, profits and compensation;
restitution and disgorgement; and other costs and expenses, including
counsel fees and expert fees.
ROBERT S. BALLAGH, JR., Individually and On Behalf of All Others
Similarly Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS,
INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS,
INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0152), filed on January
28, 2004. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of
the Investment Company Act. The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
JONATHAN GALLO, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY
FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND,
INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND,
INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE
FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD J. STERN,
CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD.,
CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States
District Court, District of Colorado (Civil Action No. 04-MK-0151),
filed on January 28, 2004. This claim alleges violations of: Sections
11 and 15 of the Securities Act; Sections 10(b) and 20(a) of the
Exchange Act; Rule 10b-5 under the Exchange Act; and Sections 34(b),
36(a) and 36(b) of the Investment Company Act. The claim also alleges
common law breach of fiduciary duty. The plaintiffs in this case are
seeking: damages; pre-judgment and post-judgment interest; counsel fees
and expert fees; and other relief.
EILEEN CLANCY, Individually and On Behalf of All Others Similarly
Situated, v. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P
500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY
FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY
MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S
MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE
FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN
GROWTH FUND (collectively known as the "INVESCO FUNDS"), AIM STOCK
FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND
FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET
FUNDS INC., AIM INTERNATIONAL FUNDS INC. (collectively known as the
"INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC.,
TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United
States District Court, Southern District of New York (Civil Action No.
04-CV-0713), filed on January 30, 2004. This claim alleges violations
of Sections 11 and 15 of the Securities Act. The plaintiffs in this
case are seeking: compensatory damages, rescission; return of fees
paid; and other costs and expenses, including counsel fees and expert
fees.
SCOTT WALDMAN, On Behalf of Himself and All Others Similarly Situated,
v. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM
STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS
INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM, in the United States
District Court, Southern District of New York (Civil Action No.
04-CV-00915), filed on February 3, 2004. This claim alleges violations
of Sections 11 and 15 of the Securities Act and common law breach of
fiduciary duty. The plaintiffs in this case are seeking compensatory
damages; injunctive relief; and costs and expenses, including counsel
fees and expert fees.
CARL E. VONDER HAAR AND MARILYN P. MARTIN, On Behalf of Themselves and All Others Similarly Situated, v. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States District Court, District of Colorado (Civil Action No. 04-CV-812), filed on February 5, 2004. This claim alleges: common law breach of fiduciary duty; breach of contract; and tortious interference with contract. The plaintiffs in this case are seeking: injunctive relief; damages; disgorgement; and costs and expenses, including counsel fees and expert fees.
HENRY KRAMER, Derivatively On Behalf of INVESCO ENERGY FUND, INVESCO
STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS v. AMVESCAP, PLC, INVESCO
FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., Defendants, AND
INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL
FUNDS, Nominal Defendants, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0397), filed on March 4,
2004. This claim alleges violations of Section 36(b) of the Investment
Company Act and common law breach of fiduciary duty. The plaintiff in
this case is seeking damages and costs and expenses, including counsel
fees and expert fees.
CYNTHIA L. ESSENMACHER, Derivatively On Behalf of the INVESCO DYNAMICS
FUND AND THE REMAINING "INVESCO FUNDS" v. INVESCO FUNDS GROUPS, INC.,
AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, Defendants, AND INVESCO
DYNAMICS FUND AND THE "INVESCO FUNDS", Nominal Defendants, in the
United States District Court, District of Delaware (Civil Action No.
04-CV-188), filed on March 29, 2004. This claim alleges: violations of
Section 36(b) of the Investment Company Act; violations of Section 206
of the Advisers Act; common law breach of fiduciary duty; and civil
conspiracy. The plaintiff in this case is seeking: damages; injunctive
relief; and costs and expenses, including counsel fees and expert fees.
APPENDIX G-2
PENDING LITIGATION ALLEGING EXCESSIVE INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM or INVESCO Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON
SMITH, Individually And On Behalf Of All Others Similarly Situated, v.
T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL,
INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM
INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third Judicial
Circuit Court for Madison County, Illinois (Case No. 2003-L-001253),
filed on September 23, 2003. This claim alleges: common law breach of
duty and common law negligence and gross negligence. The plaintiffs in
this case are seeking: compensatory and punitive damages; interest; and
attorneys' fees and costs.
JOHN BILSKI, Individually And On Behalf Of All Others Similarly
Situated, v. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC., INVESCO
INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE PRICE
INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC., in the
United States District Court, Southern District of Illinois (East St.
Louis) (Case No. 03-772), filed on November 19, 2003. This claim
alleges: violations of Sections 36(a) and 36(b) of the Investment
Company Act of 1940; common law breach of duty; and common law
negligence and gross negligence. The plaintiff in this case is seeking:
compensatory and punitive damages; interest; and attorneys' fees and
costs.
APPENDIX G-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND DISTRIBUTION FEES
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, IINA, AIM Distributors and/or INVESCO Distributors and allege that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and, in some cases, also allege that the defendants adopted unlawful distribution plans. These lawsuits either have been served or have had service of process waived as of July 14, 2004. All of these lawsuits have been transferred to the United States District Court for the Southern District of Texas, Houston Division by order of the applicable United States District Court in which they were initially filed. The plaintiff in one of these lawsuits (Ronald Kondracki v. AIM Advisors, Inc. and AIM Distributor, Inc.) has challenged this order.
RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in
the United States District Court for the Southern District of Illinois
(Civil Action No. 04-CV-263-DRH), filed on April 16, 2004. This claim
alleges violations of Section 36(b) of the Investment Company Act of
1940 (the "Investment Company Act"). The plaintiff in this case is
seeking: damages; injunctive relief; prospective relief in the form of
reduced fees; rescission of the investment advisory agreements and
distribution plans; and costs and expenses, including counsel fees.
DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND RHONDA
LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL (N.A.),
INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-978-T24-TBM),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS,
COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY
BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M
DISTRIBUTORS, INC., in the United States District Court for the Middle
District of Florida, Tampa Division (Case No. 8:04-CV-977-T17-MSS),
filed on April 29, 2004. This claim alleges violations of Sections
36(b) and 12(b) of the Investment Company Act. The plaintiffs in this
case are seeking: damages; injunctive relief; rescission of the
investment advisory agreements and distribution plans; and costs and
expenses, including counsel fees.
APPENDIX G-4
PENDING LITIGATION ALLEGING IMPROPER DISTRIBUTION FEES
CHARGED TO CLOSED FUNDS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM and/or AIM Distributors and allege that the defendants breached their fiduciary duties by charging distribution fees while funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
LAWRENCE ZUCKER, On Behalf Of AIM SMALL CAP GROWTH FUND AND AIM LIMITED
MATURITY TREASURY FUND, V. A I M ADVISORS, INC., in the United States
District Court, Southern District of Texas, Houston Division (Civil
Action No. H-03-5653), filed on December 10, 2003. This claim alleges
violations of Section 36(b) of the Investment Company Act of 1940 (the
"Investment Company Act") and common law breach of fiduciary duty. The
plaintiff in this case is seeking: damages; injunctive relief; and
costs and expenses, including counsel fees.
STANLEY LIEBER, On Behalf Of INVESCO BALANCED FUND, INVESCO CORE EQUITY
FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO EUROPEAN
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO GROWTH & INCOME FUND, INVESCO GROWTH FUND, INVESCO HEALTH
SCIENCE FUND, INVESCO HIGH YIELD FUND, INVECO INTERNATIONAL BLUE CHIP
VALUE FUND, INVESCO LEISURE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SELECT INCOME FUND, INVESCO TAX
FREE BOND FUND, INVESCO TECHNOLOGY FUND, INVESCO TELECOMMUNICATIONS
FUND, INVESCO TOTAL RETURN FUND, INVESCO US GOVERNMENT SECURITIES FUND,
INVESCO UTILITIES FUND, INVESCO VALUE EQUITY FUND, V. INVESCO FUNDS
GROUP, INC. AND A I M ADVISORS, INC., in the United States District
Court, Southern District of Texas, Houston Division (Civil Action No.
H-03-5744), filed on December 17, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act and common law breach of
fiduciary duty. The plaintiff in this case is seeking: damages;
injunctive relief; and costs and expenses, including counsel fees.
HERMAN C. RAGAN, Derivatively, And On Behalf Of Himself And All Others
Similarly Situated, v. INVESCO FUNDS GROUP, INC., AND A I M
DISTRIBUTORS, INC., in the United States District Court for the
Southern District of Georgia, Dublin Division (Civil Action No.
CV304-031), filed on May 6, 2004. This claim alleges violations of:
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 thereunder; Sections 17(a)(2) and 17(a)(3) of the
Securities Act of 1933; and Section 36(b) of the Investment Company
Act. This claim also alleges controlling person liability, within the
meaning of Section 20 of the Exchange Act against AIM Distributors. The
plaintiff in this case is seeking: damages and costs and expenses,
including counsel fees.
APPENDIX G-5
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
AND DIRECTED-BROKERAGE ARRANGEMENTS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM and INVESCO Funds and allege that the defendants improperly used the assets of the AIM and INVESCO Funds to pay brokers to aggressively push the AIM and INVESCO Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits either have been served or have had service of process waived as of July 14, 2004.
JOY D. BEASLEY and SHEILA MCDAID, Individually and On Behalf of All
Others Similarly Situated, v. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT
H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT,
ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING,
PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S.
SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND,
AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED
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 DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND
FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN
SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL
FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH
FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM
LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE
FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II
FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
Nominal Defendants, in the United States District Court for the
District of Colorado (Civil Action No. 04-B-0958), filed on May 10,
2004. The plaintiffs voluntarily dismissed this case in Colorado and
re-filed it on July 2, 2004 in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action H-04-2589).
This claim alleges violations of Sections 34(b), 36(b) and 48(a) of the
Investment Company Act of 1940 (the "Investment Company Act") and
violations of Sections 206 and 215 of the Investment Advisers Act of
1940 (the "Advisers Act"). The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are
seeking: compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees.
RICHARD TIM BOYCE v. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT
R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
AND JOHN DOES 1-100, Defendants, AND AIM AGGRESSIVE GROWTH FUND, AIM
ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED 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 DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM
EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL
COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH
FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH
CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM
LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND,
AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM
MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND
FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND,
AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY
FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM
TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND,
AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO
ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO
DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND,
INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND,
INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO
MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND,
INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, Nominal Defendants,
in the United States District Court for the District of Colorado (Civil
Action No. 04-N-0989), filed on May 13, 2004. The plaintiff voluntarily
dismissed this case in Colorado and re-filed it on July 1, 2004 in the
United States District Court for the Southern District of Texas,
Houston Division (Civil Action H-04-2587). This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment Company
Act and violations of Sections 206 and 215 of the Advisers Act. The
Claim also alleges common law breach of fiduciary duty. The plaintiff
in this case is seeking: compensatory and punitive damages; rescission
of certain Funds' advisory agreements and distribution plans and
recovery of all fees paid; an accounting of all fund-related fees,
commissions and soft dollar payments; restitution of all unlawfully or
discriminatorily obtained fees and charges; and attorneys' and experts'
fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X, unaudited financial statements for the period ended April 30, 2004, for Registrant's portfolios have been included. Such financial statements reflect all adjustments which are of a normal recurring nature and which are, in the opinion of management, necessary to a fair statement of the results for the periods presented.
FS
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS-61.79%
APPAREL RETAIL-4.64%
Ross Stores, Inc. 13,000 $ 396,500
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.56%
Liz Claiborne, Inc. 11,100 389,610
======================================================================
AUTO PARTS & EQUIPMENT-3.47%
Superior Industries International, Inc. 8,700 296,496
======================================================================
CASINOS & GAMING-3.67%
Harrah's Entertainment, Inc. 5,900 313,762
======================================================================
COMMERCIAL PRINTING-1.55%
Donnelley (R.R.) & Sons Co. 4,500 132,390
======================================================================
EMPLOYMENT SERVICES-3.90%
Manpower Inc. 7,100 332,990
======================================================================
HEALTH CARE EQUIPMENT-11.05%
Apogent Technologies Inc.(a) 8,200 265,844
----------------------------------------------------------------------
Cytyc Corp.(a) 12,900 276,060
----------------------------------------------------------------------
DENTSPLY International Inc. 8,300 402,218
======================================================================
944,122
======================================================================
INSURANCE BROKERS-4.18%
Arthur J. Gallagher & Co. 11,100 357,753
======================================================================
LEISURE PRODUCTS-4.22%
Polaris Industries Inc. 8,400 360,360
======================================================================
MANAGED HEALTH CARE-4.96%
WellPoint Health Networks Inc.(a) 3,800 424,422
======================================================================
REGIONAL BANKS-9.63%
Charter One Financial, Inc. 12,100 403,777
----------------------------------------------------------------------
North Fork Bancorp., Inc. 11,300 419,456
======================================================================
823,233
======================================================================
STEEL-2.64%
Nucor Corp. 3,800 225,720
======================================================================
THRIFTS & MORTGAGE FINANCE-3.32%
Radian Group Inc. 6,100 283,711
======================================================================
Total Domestic Common Stocks (Cost
$5,209,391) 5,281,069
======================================================================
|
----------------------------------------------------------------------
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-22.08%
AUSTRALIA-1.56%
Cochlear Ltd. (Health Care Equipment) 9,300 $ 133,569
======================================================================
CANADA-1.39%
Molson Inc.-Class A (Brewers) 5,200 118,820
======================================================================
FRANCE-2.66%
Lagardere S.C.A. (Publishing)(b) 1,800 107,748
----------------------------------------------------------------------
Zodiac S.A. (Aerospace & Defense)(b) 4,000 119,482
======================================================================
227,230
======================================================================
GERMANY-3.56%
Hugo Boss A.G.-Pfd. (Apparel, Accessories &
Luxury Goods)(b) 6,900 152,269
----------------------------------------------------------------------
Medion A.G. (Distributors)(b) 3,600 152,426
======================================================================
304,695
======================================================================
IRELAND-3.30%
Kingspan Group PLC (Building Products)(b) 22,900 121,742
----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 4,800 159,936
======================================================================
281,678
======================================================================
JAPAN-1.21%
Nintendo Co., Ltd. (Home Entertainment
Software) 1,100 103,729
======================================================================
MEXICO-3.19%
Grupo Modelo, S.A. de C.V.-Series C (Brewers) 39,200 97,893
----------------------------------------------------------------------
Grupo Televisa S.A.-ADR (Broadcasting & Cable
TV) 4,000 174,360
======================================================================
272,253
======================================================================
NETHERLANDS-1.49%
Fugro N.V.-Dutch Ctfs. (Oil & Gas Equipment &
Services)(b) 2,200 126,966
======================================================================
SWEDEN-3.72%
Hoganas A.B.-Class B (Steel)(b) 3,800 91,925
----------------------------------------------------------------------
Munters A.B. (Industrial Machinery)(b) 4,400 105,429
----------------------------------------------------------------------
Swedish Match A.B. (Tobacco)(b) 12,000 120,376
======================================================================
317,730
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $1,872,384) 1,886,670
======================================================================
|
FS-1
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-15.62%
FEDERAL HOME LOAN BANK (FHLMC)-15.62%
Unsec. Disc. Notes,
0.90%, 05/03/04 (Cost $1,334,933)(c) $1,335,000 $1,334,933
======================================================================
TOTAL INVESTMENTS-99.49% (Cost $8,416,708) 8,502,672
======================================================================
OTHER ASSETS LESS LIABILITIES-0.51% 43,841
======================================================================
NET ASSETS-100.00% $8,546,513
______________________________________________________________________
======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Ctfs. - Certificates Disc. - Discounted Pfd. - Preferred Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with procedures established by the Board
of Trustees. The aggregate market value of these securities at 04/30/04 was
$1,098,363 which represented 12.92% of the Fund's total investments. See
Note 1A.
(c) Security traded on a discount basis. The interest rate shown represents the
rate at the time of purchase by the Fund.
See accompanying notes which are an integral part of the financial statements.
FS-2
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost $8,416,708) $8,502,672
-----------------------------------------------------------
Cash 616
-----------------------------------------------------------
Receivables for:
Investments sold 130,342
-----------------------------------------------------------
Fund shares sold 220,846
-----------------------------------------------------------
Dividends 10,401
-----------------------------------------------------------
Foreign currency contracts outstanding 8,388
-----------------------------------------------------------
Amount due from advisor 11,531
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 451
-----------------------------------------------------------
Other assets 47,410
===========================================================
Total assets 8,932,657
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 352,347
-----------------------------------------------------------
Deferred compensation and retirement plans 451
-----------------------------------------------------------
Accrued distribution fees 3,924
-----------------------------------------------------------
Accrued trustees' fees 917
-----------------------------------------------------------
Accrued transfer agent fees 582
-----------------------------------------------------------
Accrued operating expenses 27,923
===========================================================
Total liabilities 386,144
===========================================================
Net assets applicable to shares outstanding $8,546,513
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,452,546
-----------------------------------------------------------
Undistributed net investment income (loss) (9,660)
-----------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 9,359
-----------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and foreign
currency contracts 94,268
===========================================================
$8,546,513
___________________________________________________________
===========================================================
NET ASSETS:
Class A $4,367,283
___________________________________________________________
===========================================================
Class B $3,057,557
___________________________________________________________
===========================================================
Class C $1,076,671
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 35,002
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 401,243
___________________________________________________________
===========================================================
Class B 281,543
___________________________________________________________
===========================================================
Class C 99,154
___________________________________________________________
===========================================================
Class R 919
___________________________________________________________
===========================================================
Institutional Class 3,217
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.88
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.88 divided by
94.50%) $ 11.51
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.86
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.86
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.88
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.88
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-3
STATEMENT OF OPERATIONS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $817) $ 21,436
----------------------------------------------------------------------
Interest 2,514
======================================================================
Total investment income 23,950
======================================================================
EXPENSES:
Advisory fees 11,662
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 7,127
----------------------------------------------------------------------
Distribution fees:
Class A 2,735
----------------------------------------------------------------------
Class B 4,673
----------------------------------------------------------------------
Class C 2,090
----------------------------------------------------------------------
Transfer agent fees-Class A, B, C and R 1,287
----------------------------------------------------------------------
Trustees' fees 5,939
----------------------------------------------------------------------
Registration and filing fees 9,733
----------------------------------------------------------------------
Reports to shareholders 10,500
----------------------------------------------------------------------
Professional fees 23,891
----------------------------------------------------------------------
Other 2,329
======================================================================
Total expenses 106,829
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (73,219)
======================================================================
Net expenses 33,610
======================================================================
Net investment income (loss) (9,660)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FOREIGN CURRENCY
CONTRACTS:
Net realized gain (loss) from:
Investment securities 12,244
----------------------------------------------------------------------
Foreign currencies (2,885)
======================================================================
9,359
======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 85,964
----------------------------------------------------------------------
Foreign currencies (84)
----------------------------------------------------------------------
Foreign currency contracts 8,388
======================================================================
94,268
======================================================================
Net gain from investment securities, foreign currencies and
foreign currency contracts 103,627
======================================================================
Net increase in net assets resulting from operations $ 93,967
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-4
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
--------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (9,660)
--------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 9,359
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and foreign currency
contracts 94,268
==========================================================================
Net increase in net assets resulting from operations 93,967
==========================================================================
Share transactions-net:
Class A 4,327,447
--------------------------------------------------------------------------
Class B 3,019,825
--------------------------------------------------------------------------
Class C 1,060,271
--------------------------------------------------------------------------
Class R 10,000
--------------------------------------------------------------------------
Institutional Class 35,003
==========================================================================
Net increase in net assets resulting from share
transactions 8,452,546
==========================================================================
Net increase in net assets 8,546,513
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income (loss) of $(9,660)) $8,546,513
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-5
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Endeavor Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
FS-6
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $1
billion of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to
FS-7
be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $11,662 and reimbursed expenses of $61,504. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the period ended April 30, 2004, AISI retained $321 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $2,735, $4,673, $2,090 and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $5,784 in front-end sales commissions from the sale of Class A shares and $0, $768, $0 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $45 and reductions in custodian fees of $8 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $53.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be
FS-8
compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--FOREIGN CURRENCY CONTRACTS
OPEN FOREIGN CURRENCY CONTRACTS AT PERIOD END
-------------------------------------------------------------------------------
CONTRACT TO
SETTLEMENT ------------------- UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
-------------------------------------------------------------------------------
01/12/05 EUR $ 79,170 $100,000 $ 94,416 $5,584
-------------------------------------------------------------------------------
04/14/05 EUR 416,910 500,000 497,196 2,804
===============================================================================
$496,080 $600,000 $591,612 $8,388
_______________________________________________________________________________
===============================================================================
|
NOTE 7--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Fund to utilize. The ability to use capital loss carryforward may be limited under the Internal Revenue Code and related regulations.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the period ended April 30, 2004 was $7,549,079 and $479,549, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 208,186
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (122,222)
==========================================================
Net unrealized appreciation of investment
securities $ 85,964
__________________________________________________________
==========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 9--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED)
THROUGH
APRIL 30, 2004
---------------------
SHARES AMOUNT
-----------------------------------------------------------------------------------
Sold:
Class A 409,118 $4,413,682
-----------------------------------------------------------------------------------
Class B 284,153 3,048,687
-----------------------------------------------------------------------------------
Class C 99,154 1,060,271
-----------------------------------------------------------------------------------
Class R* 919 10,000
-----------------------------------------------------------------------------------
Institutional Class* 3,217 35,003
===================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 126 1,394
-----------------------------------------------------------------------------------
Class B (126) (1,394)
===================================================================================
Reacquired:
Class A (8,001) (87,629)
-----------------------------------------------------------------------------------
Class B (2,484) (27,468)
===================================================================================
786,076 $8,452,546
___________________________________________________________________________________
===================================================================================
|
* Class R shares and Institutional Class shares commenced sales on April 30, 2004.
FS-9
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.90
================================================================================
Total from investment operations 0.88
================================================================================
Net asset value, end of period $10.88
________________________________________________________________________________
================================================================================
Total return(b) 8.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,367
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.01%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.03%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (0.36)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,597,929.
(d) Not annualized for periods less than one year.
FS-10
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.91
================================================================================
Total from investment operations 0.86
================================================================================
Net asset value, end of period $10.86
________________________________________________________________________________
================================================================================
Total return(b) 8.60%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $3,058
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.66%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.68%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.01)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $955,454.
(d) Not annualized for periods less than one year.
FS-11
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.91
================================================================================
Total from investment operations 0.86
================================================================================
Net asset value, end of period $10.86
________________________________________________________________________________
================================================================================
Total return(b) 8.60%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,077
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.66%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.68%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.01)%
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 16%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $427,333.
(d) Not annualized for periods less than one year.
FS-12
NOTE 10--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.88
-----------------------------------------------------------------------------
Net investment income --
=============================================================================
Net asset value, end of period $10.88
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets --
=============================================================================
Ratio of net investment income (loss) to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 16%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.88
-----------------------------------------------------------------------------------
Net investment income --
===================================================================================
Net asset value, end of period $10.88
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 35
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
===================================================================================
Ratio of net investment income (loss) to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 16%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for periods less than one year.
NOTE 11--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions
FS-13
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,292 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
FS-14
NOTE 11--LEGAL PROCEEDINGS (CONTINUED)
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-15
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-55.26%
ASSET MANAGEMENT & CUSTODY BANKS-2.52%
State Street Corp. 5,900 $ 287,920
======================================================================
CASINOS & GAMING-2.89%
Harrah's Entertainment, Inc. 6,200 329,716
======================================================================
COMPUTER & ELECTRONICS RETAIL-3.12%
RadioShack Corp. 11,600 356,816
======================================================================
CONSTRUCTION MATERIALS-2.02%
Vulcan Materials Co. 5,000 231,200
======================================================================
CONSUMER FINANCE-3.60%
American Express Co. 8,400 411,180
======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.74%
Sabre Holdings Corp. 8,400 198,156
======================================================================
DIVERSIFIED CHEMICALS-1.91%
Engelhard Corp. 7,500 217,800
======================================================================
ELECTRONIC MANUFACTURING SERVICES-2.12%
Molex Inc.-Class A 9,400 242,144
======================================================================
EMPLOYMENT SERVICES-1.64%
Manpower Inc. 4,000 187,600
======================================================================
HEALTH CARE EQUIPMENT-3.67%
Becton, Dickinson & Co. 8,300 419,565
======================================================================
HEALTH CARE SERVICES-2.74%
IMS Health Inc. 12,400 313,100
======================================================================
HYPERMARKETS & SUPER CENTERS-1.67%
Costco Wholesale Corp.(a) 5,100 190,995
======================================================================
INSURANCE BROKERS-2.25%
Marsh & McLennan Cos., Inc. 5,700 257,070
======================================================================
INTERNET RETAIL-1.67%
IAC/InterActiveCorp.(a) 6,000 191,220
======================================================================
MOVIES & ENTERTAINMENT-2.14%
Walt Disney Co. (The) 10,600 244,118
======================================================================
PROPERTY & CASUALTY INSURANCE-3.91%
Progressive Corp. (The) 5,100 446,352
======================================================================
PUBLISHING-4.54%
Knight-Ridder, Inc. 3,600 278,784
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
PUBLISHING-(CONTINUED)
Meredith Corp. 4,700 $ 239,418
======================================================================
518,202
======================================================================
REAL ESTATE-2.24%
Equity Residential 9,300 255,378
======================================================================
SPECIALIZED FINANCE-2.43%
Moody's Corp. 4,300 277,393
======================================================================
SPECIALTY CHEMICALS-2.33%
Sigma-Aldrich Corp. 4,700 266,208
======================================================================
SYSTEMS SOFTWARE-2.00%
Oracle Corp.(a) 20,400 228,888
======================================================================
TRADING COMPANIES & DISTRIBUTORS-2.11%
W.W. Grainger, Inc. 4,600 241,040
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $6,350,359) 6,312,061
======================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-29.22%
DENMARK-0.61%
Novozymes A.S.-Class B (Specialty
Chemicals)(b) 1,700 69,491
======================================================================
FRANCE-1.44%
Societe BIC S.A. (Office Services &
Supplies)(b) 3,800 164,501
======================================================================
IRELAND-2.92%
Kerry Group PLC-Class A (Packaged Foods &
Meats)(b) 12,000 229,867
----------------------------------------------------------------------
Ryanair Holdings PLC-ADR (Airlines)(a) 3,100 103,292
======================================================================
333,159
======================================================================
ITALY-1.78%
Luxottica Group S.p.A.-ADR (Apparel,
Accessories & Luxury Goods) 12,400 203,360
======================================================================
JAPAN-5.50%
Canon Inc. (Office Electronics) 7,000 366,787
----------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronic
Equipment Manufacturers) 4,000 262,081
======================================================================
628,868
======================================================================
MEXICO-3.70%
Cemex S.A. de C.V.-ADR (Construction
Materials) 10,900 321,005
----------------------------------------------------------------------
Grupo Modelo S.A. de C.V.-Series C (Brewers) 40,700 101,638
======================================================================
422,643
======================================================================
SINGAPORE-1.51%
Singapore Press Holdings Ltd. (Publishing) 14,000 172,738
======================================================================
|
FS-16
MARKET
SHARES VALUE
----------------------------------------------------------------------
UNITED KINGDOM-11.76%
Compass Group PLC (Restaurants)(b) 21,900 $ 137,561
----------------------------------------------------------------------
Reed Elsevier PLC (Publishing)(b) 45,800 425,304
----------------------------------------------------------------------
Smiths Group PLC (Industrial
Conglomerates)(b) 18,200 225,217
----------------------------------------------------------------------
Tesco PLC (Food Retail)(b) 39,200 172,647
----------------------------------------------------------------------
WPP Group PLC (Advertising)(b) 38,900 382,826
======================================================================
1,343,555
======================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $3,288,062) 3,338,315
======================================================================
|
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-15.03%
FEDERAL HOME LOAN BANK-15.03%
Unsec. Disc. Notes, 0.90%, 05/03/04 (Cost
$1,716,914)(c) $1,717,000 $ 1,716,914
=======================================================================
TOTAL INVESTMENTS-99.51% (Cost $11,355,335) 11,367,290
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.49% 55,609
=======================================================================
NET ASSETS-100.00% 11,422,899
_______________________________________________________________________
=======================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Disc. - Discounted Unsec. - Unsecured |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by
the Board of Trustees. The aggregate market value of these securities at
04/30/04 was $1,807,414 which represented 15.90% of the Fund's total
investments. See Note 1A.
(c) Zero coupon bond issued at a discount. The interest rate shown
represents the yield to maturity at issue.
See accompanying notes which are an integral part of the financial statements.
FS-17
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost
$11,355,335) $11,367,290
-----------------------------------------------------------
Foreign currencies, at value (cost $0) 18
-----------------------------------------------------------
Receivables for:
Investments sold 94,930
-----------------------------------------------------------
Fund shares sold 247,036
-----------------------------------------------------------
Dividends 18,627
-----------------------------------------------------------
Amount due from advisor 4,234
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 452
-----------------------------------------------------------
Other assets 45,709
===========================================================
Total assets 11,778,296
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 305,256
-----------------------------------------------------------
Deferred compensation and retirement plans 452
-----------------------------------------------------------
Accrued distribution fees 5,249
-----------------------------------------------------------
Accrued trustees' fees 706
-----------------------------------------------------------
Accrued transfer agent fees 2,191
-----------------------------------------------------------
Accrued operating expenses 41,543
===========================================================
Total liabilities 355,397
===========================================================
Net assets applicable to shares outstanding $11,422,899
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $11,414,408
-----------------------------------------------------------
Undistributed net investment income (loss) (22,763)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign currencies 19,174
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 12,080
===========================================================
$11,422,899
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 6,566,311
___________________________________________________________
===========================================================
Class B $ 2,616,389
___________________________________________________________
===========================================================
Class C $ 2,220,199
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 10,000
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 624,736
___________________________________________________________
===========================================================
Class B 249,766
___________________________________________________________
===========================================================
Class C 211,948
___________________________________________________________
===========================================================
Class R 951.5
___________________________________________________________
===========================================================
Institutional Class 951.5
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.51
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.51 divided by
94.50%) $ 11.12
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.48
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.48
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.51
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.51
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-18
STATEMENT OF OPERATIONS
For the period November 4, 2003 (date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $2,279) $ 36,718
----------------------------------------------------------------------
Interest 4,021
======================================================================
Total investment income 40,739
======================================================================
EXPENSES:
Advisory fees 21,643
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 30,477
----------------------------------------------------------------------
Distribution fees:
Class A 5,567
----------------------------------------------------------------------
Class B 5,135
----------------------------------------------------------------------
Class C 4,422
----------------------------------------------------------------------
Transfer agent fees Class -- A, B, C and R 3,965
----------------------------------------------------------------------
Trustees' fees 5,733
----------------------------------------------------------------------
Registration and filing fees 9,558
----------------------------------------------------------------------
Reports to shareholders 14,419
----------------------------------------------------------------------
Professional fees 24,913
----------------------------------------------------------------------
Other 2,652
======================================================================
Total expenses 153,347
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (89,845)
======================================================================
Net expenses 63,502
======================================================================
Net investment income (loss) (22,763)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 20,329
----------------------------------------------------------------------
Foreign currencies (1,155)
======================================================================
19,174
======================================================================
Change in net unrealized appreciation of:
Investment securities 11,955
----------------------------------------------------------------------
Foreign currencies 125
======================================================================
12,080
======================================================================
Net gain from investment securities and foreign currencies 31,254
======================================================================
Net increase in net assets resulting from operations $ 8,491
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-19
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
---------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,763)
---------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 19,174
---------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 12,080
===========================================================================
Net increase in net assets resulting from operations 8,491
===========================================================================
Share transactions-net:
Class A 6,557,762
---------------------------------------------------------------------------
Class B 2,616,958
---------------------------------------------------------------------------
Class C 2,219,688
---------------------------------------------------------------------------
Class R 10,000
---------------------------------------------------------------------------
Institutional Class 10,000
===========================================================================
Net increase in net assets resulting from share
transactions 11,414,408
===========================================================================
Net increase in net assets 11,422,899
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of period (including undistributed net investment
income (loss) of $(22,763)) $11,422,899
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-20
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds..
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-21
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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. REDEMPTION FEES -- Effective November 24, 2003, the Fund instituted a 2% redemption fee on certain share classes that is to be retained by the Fund to offset transaction costs and other expenses associated with short-term redemptions and exchanges. The fee, subject to certain exceptions, is imposed on certain redemptions, including exchanges of shares held less than 30 days. The redemption fee is accounted for as an addition to shares of beneficial interest by the Fund and is allocated among the share classes based on the relative net assets of each class.
E. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of Subchapter M 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
G. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
H. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.25%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.25% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
FS-22
credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. Voluntary fee waivers or reimbursements may be modified or discontinued at any time without further notice to investors. During periods of fee waivers or reimbursements to the extent the annualized expense ratio does not exceed the limit for the period committed, AIM will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $21,643 and reimbursed expenses of $68,172. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the period ended April 30, 2004, AISI retained $919 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $5,567, $5,135, $4,422, and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. For the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $14,487 in front-end sales commissions from the sale of Class A shares and $0, $100, $100 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AIM Funds Management, AISI, and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $18 and reductions in custodian fees of $12 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $30.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
For the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
FS-23
For the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund for the period ended April 30, 2004 was $10,604,174 and $986,082, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 244,721
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (232,766)
==========================================================
Net unrealized appreciation of investment
securities $ 11,955
__________________________________________________________
==========================================================
Investments have the same costs for tax and financial
statement purposes.
|
NOTE 8--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
--------------------------------------------------------------------------------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30, 2004
------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------------
Sold:
Class A 645,194 $ 6,770,810
--------------------------------------------------------------------------------------
Class B 254,350 2,665,469
--------------------------------------------------------------------------------------
Class C 213,776 2,238,908
--------------------------------------------------------------------------------------
Class R* 951.5 10,000
--------------------------------------------------------------------------------------
Institutional Class* 951.5 10,000
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 2,194 23,415
--------------------------------------------------------------------------------------
Class B (2,199) (23,415)
======================================================================================
Reacquired**:
Class A (22,652) (236,463)
--------------------------------------------------------------------------------------
Class B (2,385) (25,096)
--------------------------------------------------------------------------------------
Class C (1,828) (19,220)
======================================================================================
1,088,353 $11,414,408
______________________________________________________________________________________
======================================================================================
|
* Class R and Institutional Class shares commenced sales on April 30, 2004. ** Amount is net of redemption fees of $134, $53 and $45 for Class A, Class B and Class C shares for 2004, respectively.
FS-24
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.54
================================================================================
Total from investment operations 0.51
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.51
________________________________________________________________________________
================================================================================
Total return(b) 5.10%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,566
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.25%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 5.78%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (0.65)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,252,018.
(d) Not annualized for periods of less than one year.
FS-25
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
================================================================================
Total from investment operations 0.48
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.48
________________________________________________________________________________
================================================================================
Total return(b) 4.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,616
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,050,035.
(d) Not annualized for periods of less than one year.
FS-26
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
--------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
--------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
--------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.55
================================================================================
Total from investment operations 0.48
================================================================================
Redemption fees added to shares of beneficial interest 0.00
================================================================================
Net asset value, end of period $10.48
________________________________________________________________________________
================================================================================
Total return(b) 4.80%
________________________________________________________________________________
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,220
________________________________________________________________________________
================================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.90%(c)
--------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 6.43%(c)
================================================================================
Ratio of net investment income (loss) to average net assets (1.30)%(c)
________________________________________________________________________________
================================================================================
Portfolio turnover rate(d) 22%
________________________________________________________________________________
================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $904,143.
(d) Not annualized for periods of less than one year.
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.51
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) --
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
=============================================================================
Total from investment operations --
=============================================================================
Net asset value, end of period $10.51
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
-----------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
=============================================================================
Ratio of net investment income to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 22%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
FS-27
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL
CLASS
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------
Net asset value, beginning of period $10.51
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income --
-----------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) --
=============================================================================
Total from investment operations --
=============================================================================
Net asset value, end of period $10.51
_____________________________________________________________________________
=============================================================================
Total return --
_____________________________________________________________________________
=============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
_____________________________________________________________________________
=============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements --
-----------------------------------------------------------------------------
Without fee waivers and expense reimbursements --
=============================================================================
Ratio of net investment income to average net assets --
_____________________________________________________________________________
=============================================================================
Portfolio turnover rate(a) 22%
_____________________________________________________________________________
=============================================================================
|
(a) Not annualized for periods less than one year.
NOTE 10--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's
FS-28
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,364 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
FS-29
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-30
FINANCIALS
SCHEDULE OF INVESTMENTS
April 30, 2004
(Unaudited)
MARKET
SHARES VALUE
----------------------------------------------------------------------
DOMESTIC COMMON STOCKS & OTHER EQUITY
INTERESTS-70.00%
ADVERTISING-3.91%
ADVO, Inc. 5,300 $ 166,420
----------------------------------------------------------------------
Harte-Hanks, Inc. 6,600 158,136
======================================================================
324,556
======================================================================
AGRICULTURAL PRODUCTS-1.34%
Delta & Pine Land Co. 4,600 111,596
======================================================================
AIR FREIGHT & LOGISTICS-2.24%
Dynamex Inc.(a) 14,000 186,060
======================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-4.71%
Hampshire Group, Ltd.(a) 13,100 391,061
======================================================================
AUTO PARTS & EQUIPMENT-2.13%
Superior Industries International, Inc. 5,200 177,216
======================================================================
CASINOS & GAMING-2.24%
Argosy Gaming Co.(a) 5,000 185,950
======================================================================
DATA PROCESSING & OUTSOURCED SERVICES-3.15%
Sabre Holdings Corp. 11,100 261,849
======================================================================
DIVERSIFIED COMMERCIAL SERVICES-8.22%
FTI Consulting, Inc.(a) 20,000 329,000
----------------------------------------------------------------------
Learning Tree International, Inc.(a) 10,400 163,696
----------------------------------------------------------------------
PRG-Schultz International, Inc.(a) 40,500 190,350
======================================================================
683,046
======================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.10%
Mettler-Toledo International Inc.(a) 3,900 174,798
======================================================================
HEALTH CARE EQUIPMENT-5.04%
Cytyc Corp.(a) 7,800 166,920
----------------------------------------------------------------------
DENTSPLY International Inc. 5,200 251,992
======================================================================
418,912
======================================================================
HEALTH CARE SUPPLIES-12.14%
Cooper Cos., Inc. (The) 5,900 318,600
----------------------------------------------------------------------
Ocular Sciences, Inc.(a) 7,300 205,130
----------------------------------------------------------------------
Sola International Inc.(a) 14,200 291,384
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
HEALTH CARE SUPPLIES-(CONTINUED)
Sybron Dental Specialties, Inc.(a) 6,600 $ 193,050
======================================================================
1,008,164
======================================================================
LEISURE PRODUCTS-4.93%
Oakley, Inc. 11,000 152,240
----------------------------------------------------------------------
Polaris Industries Inc. 6,000 257,400
======================================================================
409,640
======================================================================
OFFICE SERVICES & SUPPLIES-2.00%
HNI Corp. 4,500 166,545
======================================================================
PAPER PACKAGING-1.77%
Longview Fibre Co. 14,000 146,720
======================================================================
PHARMACEUTICALS-3.42%
Endo Pharmaceuticals Holdings Inc.(a) 11,900 284,053
======================================================================
REAL ESTATE-1.20%
MeriStar Hospitality Corp.(a) 17,200 99,760
======================================================================
REGIONAL BANKS-1.97%
Alabama National BanCorp. 3,200 163,264
======================================================================
RESTAURANTS-2.91%
IHOP Corp. 6,500 241,475
======================================================================
SPECIALTY CHEMICALS-2.69%
MacDermid, Inc. 6,900 223,422
======================================================================
TRUCKING-1.89%
Landstar System, Inc.(a) 3,500 157,360
======================================================================
Total Domestic Common Stocks & Other
Equity Interests (Cost $5,791,412) 5,815,447
======================================================================
FOREIGN STOCKS-14.51%
CANADA-14.51%
Cott Corp. (Soft Drinks)(a) 3,000 91,757
----------------------------------------------------------------------
Cymat Corp. (Aluminum)(a) 178,600 75,526
----------------------------------------------------------------------
FirstService Corp. (Diversified Commercial
Services)(a) 17,700 391,025
----------------------------------------------------------------------
Husky Injection Molding Systems Ltd.
(Industrial Machinery)(a) 73,600 277,969
----------------------------------------------------------------------
Sleeman Breweries Ltd. (Brewers)(a) 22,900 214,382
----------------------------------------------------------------------
Vincor International Inc. (Distillers &
Vintners)(a) 7,300 154,351
======================================================================
Total Foreign Stocks (Cost $1,206,587) 1,205,010
======================================================================
|
FS-31
PRINCIPAL MARKET
AMOUNT VALUE
----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-14.24%
FEDERAL HOME LOAN MORTGAGE CORP.
(FHLMC)-14.24%
Unsec. Disc. Notes, 0.90%, 05/03/04 (Cost
$1,182,941)(b) $1,183,000 $1,182,941
======================================================================
TOTAL INVESTMENTS-98.75% (Cost $8,180,940) 8,203,398
======================================================================
OTHER ASSETS LESS LIABILITIES-1.25% 103,883
======================================================================
NET ASSETS-100.00% $8,307,281
______________________________________________________________________
======================================================================
|
Investment Abbreviations
Disc. - Discount Unsec. - Unsecured |
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.
See accompanying notes which are an integral part of the financial statements.
FS-32
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004
(Unaudited)
ASSETS:
Investments, at market value (cost $8,180,940) $8,203,398
-----------------------------------------------------------
Cash 417
-----------------------------------------------------------
Receivables for:
Investments sold 223,439
-----------------------------------------------------------
Fund shares sold 88,689
-----------------------------------------------------------
Dividends 4,283
-----------------------------------------------------------
Amount due from advisor 6,830
-----------------------------------------------------------
Investment for deferred compensation and
retirement plans 452
-----------------------------------------------------------
Other assets 46,812
===========================================================
Total assets 8,574,320
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 237,024
-----------------------------------------------------------
Fund shares reacquired 1,235
-----------------------------------------------------------
Deferred compensation and retirement plans 452
-----------------------------------------------------------
Accrued distribution fees 3,473
-----------------------------------------------------------
Accrued trustees' fees 921
-----------------------------------------------------------
Accrued transfer agent fees 1,847
-----------------------------------------------------------
Accrued operating expenses 22,087
===========================================================
Total liabilities 267,039
===========================================================
Net assets applicable to shares outstanding $8,307,281
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $8,290,672
-----------------------------------------------------------
Undistributed net investment income (loss) (23,450)
-----------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 17,679
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 22,380
===========================================================
$8,307,281
___________________________________________________________
===========================================================
NET ASSETS:
Class A $5,294,640
___________________________________________________________
===========================================================
Class B $1,727,005
___________________________________________________________
===========================================================
Class C $1,237,483
___________________________________________________________
===========================================================
Class R $ 10,000
___________________________________________________________
===========================================================
Institutional Class $ 38,153
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 501,263
___________________________________________________________
===========================================================
Class B 163,932
___________________________________________________________
===========================================================
Class C 117,446
___________________________________________________________
===========================================================
Class R 947
___________________________________________________________
===========================================================
Institutional Class 3,613
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.56
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.56 divided by
94.50%) $ 11.17
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.53
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.54
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.56
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.56
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-33
STATEMENT OF OPERATIONS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
INVESTMENT INCOME:
Dividends $ 7,422
----------------------------------------------------------------------
Interest 2,824
======================================================================
Total investment income 10,246
======================================================================
EXPENSES:
Advisory fees 12,482
----------------------------------------------------------------------
Administrative services fees 24,863
----------------------------------------------------------------------
Custodian fees 8,636
----------------------------------------------------------------------
Distribution fees:
Class A 2,817
----------------------------------------------------------------------
Class B 3,968
----------------------------------------------------------------------
Class C 2,667
----------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 3,645
----------------------------------------------------------------------
Trustees' fees 5,944
----------------------------------------------------------------------
Registration and filing fees 9,684
----------------------------------------------------------------------
Reports to shareholders 5,600
----------------------------------------------------------------------
Professional fees 23,894
----------------------------------------------------------------------
Other 3,165
======================================================================
Total expenses 107,365
======================================================================
Less: Fees waived, expenses reimbursed, and expense offset
arrangements (73,669)
======================================================================
Net expenses 33,696
======================================================================
Net investment income (loss) (23,450)
======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 23,198
----------------------------------------------------------------------
Foreign currencies (5,519)
======================================================================
17,679
======================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 22,458
----------------------------------------------------------------------
Foreign currencies (78)
======================================================================
22,380
======================================================================
Net gain from investment securities and foreign currencies 40,059
======================================================================
Net increase in net assets resulting from operations $ 16,609
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-34
STATEMENT OF CHANGES IN NET ASSETS
For the period November 4, 2003 (Date operations commenced) through April 30,
2004
(Unaudited)
APRIL 30,
2004
--------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (23,450)
--------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 17,679
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 22,380
==========================================================================
Net increase in net assets resulting from operations 16,609
==========================================================================
Share transactions-net:
Class A 5,321,207
--------------------------------------------------------------------------
Class B 1,700,765
--------------------------------------------------------------------------
Class C 1,220,547
--------------------------------------------------------------------------
Class R 10,000
--------------------------------------------------------------------------
Institutional Class 38,153
==========================================================================
Net increase in net assets resulting from share
transactions 8,290,672
==========================================================================
Net increase in net assets 8,307,281
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income (loss) of $(23,450)) $8,307,281
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-35
NOTES TO FINANCIAL STATEMENTS
April 30, 2004
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Trimark Small Companies Fund (the "Fund") is a separate series of AIM Investment Funds (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 six separate series portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently offers multiple classes of shares. 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 commenced operations on November 4, 2003.
The Fund's investment objective is long-term growth of capital. Each company listed in the Schedule of Investments is organized in the United States of America unless otherwise noted.
Under the Trust's organizational documents, the Fund's officers, trustees and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts.
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 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") as of the close of the customary trading session on the valuation date or absent a NOCP, 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. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value. 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"). Investments in open-end registered investment companies and closed-end registered investment companies that do not trade on an exchange are valued at the end of the day net asset value per share. Investments in closed-end registered investment companies that trade on an exchange are valued at the last sales price as of the close of the customary trading session on the exchange where the security is principally traded.
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 ordinarily be reflected in the computation of the Fund's net asset value. If a development/event is so significant such 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. Adjustments to closing prices to reflect fair value on affected foreign securities may be provided by an independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures and exchange-traded funds.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions are accounted for on a trade date basis.
FS-36
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. Bond premiums and discounts are amortized and/or accreted for financial reporting purposes.
The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.
Brokerage commissions and mark ups are considered transactions costs and
are recorded as an increase to the cost basis of securities purchased
and/or a reduction of proceeds on a sale of securities. Such transaction
costs are included in the determination of realized and unrealized gain
(loss) from investment securities reported in the Statement of Operations
and the Statement of Changes in Net Assets and the realized and unrealized
net gains (losses) on securities per share in the Financial Highlights.
Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These
transaction costs are not considered operating expenses and are not
reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation
arrangements between the Fund and the advisor.
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 Subchapter M 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.
E. FOREIGN CURRENCY TRANSLATIONS -- Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from, (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
F. FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.
G. EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. The Fund's advisor has voluntarily
agreed to waive advisory fees or reimburse expenses of Class A, Class B and
Class C shares to the extent necessary to limit Total Annual Fund Operating
Expenses (excluding certain items discussed below) of Class A shares to 2.00%.
In determining the advisor's obligation to waive advisory fees and/or reimburse
expenses, the following expenses are not taken into account, and could cause the
Total Annual Fund Operating Expenses to exceed the 2.00% cap: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these
are expenses that are not anticipated to arise from the Fund's day-to-day
operations), as defined in the Financial Accounting Standard's Board's Generally
Accepted Accounting Principles or as approved by the Fund's board of trustees;
(v) expenses related to a merger or reorganization, as approved by the Fund's
board of trustees; and (vi) expenses that the Fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the only
expense offset arrangements from which the Fund benefits are in the form of
credits that the Fund receives from banks where the Fund or its transfer agent
has deposit accounts in which it holds uninvested cash. Those credits are used
to pay certain expenses incurred by the Fund. Voluntary fee waivers or
reimbursements may be modified or discontinued at any time without further
notice to investors. During periods of fee waivers or reimbursements to the
extent the annualized expense ratio does not exceed the limit for the period
committed, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end
FS-37
of each fiscal year. 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 on investments by the Fund in such affiliated money market funds. For the period ended April 30, 2004, AIM waived fees of $12,482 and reimbursed expenses of $61,161. Under the terms of a master sub-advisory agreement between AIM and AIM Funds Management Inc. ("AIM Funds Management"), AIM pays AIM Funds Management 40% of the amount paid by the Fund to AIM.
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 period ended April 30, 2004, AIM was paid $24,863 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI"), formerly known as A I M Fund Services, Inc., a fee for providing transfer agency and shareholder services to the Fund. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. During the period ended April 30, 2004, AISI retained $1,022 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 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, Class B, Class C 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, up to 0.25% of the average daily net assets of the Class A, Class B, Class C or Class R shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. 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 period ended April 30, 2004, the Class A, Class B, Class C and Class R shares paid $2,817, $3,968, $2,667 and $0, respectively.
Front-end sales commissions and contingent deferred sales charges ("CDSC") (collectively the "sales charges") are not recorded as 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. CDSC are deducted from redemption proceeds prior to remittance to the shareholder. During the period ended April 30, 2004, AIM Distributors advised the Fund that it retained $9,012 in front-end sales commissions from the sale of Class A shares and $0, $0, $10 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
NOTE 3--EXPENSE OFFSET ARRANGEMENTS
Indirect expenses under expense offset arrangements are comprised of transfer agency credits resulting from balances in Demand Deposit Accounts (DDA) used by the transfer agency for clearing shareholder transactions and custodian credits resulting from periodic overnight cash balances at the custodian. For the period ended April 30, 2004, the Fund received reductions in transfer agency fees from AISI (an affiliate of AIM) of $11 and reductions in custodian fees of $15 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $26.
NOTE 4--TRUSTEES' FEES
Trustees' fees represent remuneration paid to each Trustee of the Trust 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 and INVESCO Funds in which their deferral accounts shall be deemed to be invested.
Current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees that also participate in a retirement plan and receive benefits under such plan.
Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
During the period ended April 30, 2004, the Fund paid legal fees of $198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Independent Trustees. A member of that firm is a Trustee of the Trust.
NOTE 5--BORROWINGS
Pursuant to an exemptive order from the SEC, the Fund may participate in an interfund lending facility that AIM has established for temporary borrowings by the AIM Funds and the INVESCO Funds. An interfund loan will be made under this facility only if the loan rate (an average of the rate available on bank loans and the rate available on investments in overnight repurchase agreements) is favorable to both the lending fund and the borrowing fund. Under certain circumstances, a loan will be secured by collateral. To the extent that the loan is required to be secured by collateral, the collateral is marked to market daily to ensure that the market value is at least 102% of the outstanding principal value of the loan.
The Fund is a participant in an uncommitted unsecured revolving credit facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the credit facility can borrow on a first come, first served basis. Principal on each loan outstanding shall bear interest at the bid rate quoted by SSB at the time of the request for the loan.
During the period ended April 30, 2004, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds in the account so the custodian can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank. In either case, the custodian bank will be compensated an amount equal to the Federal Funds rate plus 100 basis points.
FS-38
NOTE 6--TAX INFORMATION
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforward) under income tax regulations. The tax character of distributions paid during the year and the tax components of net assets will be updated at the Fund's fiscal year-end.
Capital loss carry forward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carry forward actually available for the fund to utilize. The ability to use capital loss carry forward may be limited under the Internal Revenue Code and related regulations.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities and money market funds) purchased and sold by the Fund during the period ended April 30, 2004 was $7,256,532 and $281,731, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF
INVESTMENT SECURITIES ON A TAX BASIS
----------------------------------------------------------
Aggregate unrealized appreciation of
investment securities $ 242,194
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (219,736)
==========================================================
Net unrealized appreciation of investment
securities $ 22,458
__________________________________________________________
==========================================================
Investments have the same cost for tax and financial
statement purposes.
|
NOTE 8--SHARE INFORMATION
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 CDSC. Class R shares and Institutional Class shares are sold at net asset value. Under some circumstances, Class A shares and Class R shares are subject to CDSC. Generally, Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase.
CHANGES IN SHARES OUTSTANDING
---------------------------------------------------------------------------------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,2004
-------------------------
SHARES AMOUNT
---------------------------------------------------------------------------------------
Sold:
Class A 510,721 $5,419,564
---------------------------------------------------------------------------------------
Class B 165,572 1,717,922
---------------------------------------------------------------------------------------
Class C 117,564 1,221,816
---------------------------------------------------------------------------------------
Class R* 947 10,000
---------------------------------------------------------------------------------------
Institutional Class* 3,613 38,153
=======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 528 5,631
---------------------------------------------------------------------------------------
Class B (530) (5,631)
=======================================================================================
Reacquired:
Class A (9,986) (103,988)
---------------------------------------------------------------------------------------
Class B (1,110) (11,526)
---------------------------------------------------------------------------------------
Class C (118) (1,269)
=======================================================================================
787,201 $8,290,672
_______________________________________________________________________________________
=======================================================================================
|
* Class R shares and Institutional Class shares commenced sales on April 30, 2004.
FS-39
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.63
==============================================================================
Total from investment operations 0.56
==============================================================================
Net asset value, end of period $10.56
______________________________________________________________________________
==============================================================================
Total return(b) 5.60%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,295
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.00%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.02%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.30)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,645,835.
(d) Not annualized for a period less than one year.
FS-40
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.63
==============================================================================
Total from investment operations 0.53
==============================================================================
Net asset value, end of period $10.53
______________________________________________________________________________
==============================================================================
Total return(b) 5.30%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,727
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.65%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.67%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.95)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of $811,347.
(d) Not annualized for a period less than one year.
FS-41
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------
NOVEMBER 4, 2003
(DATE OPERATIONS
COMMENCED) TO
APRIL 30,
2004
------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10)(a)
------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.64
==============================================================================
Total from investment operations 0.54
==============================================================================
Net asset value, end of period $10.54
______________________________________________________________________________
==============================================================================
Total return(b) 5.40%
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,237
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:
With fee waivers and expense reimbursements 2.65%(c)
------------------------------------------------------------------------------
Without fee waivers and expense reimbursements 7.67%(c)
==============================================================================
Ratio of net investment income (loss) to average net assets (1.95)(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d) 11%
______________________________________________________________________________
==============================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset
value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Does not include sales charges and is not
annualized for a period less than one year.
(c) Ratios are annualized and based on average daily net assets of $545,255.
(d) Not annualized for a period less than one year.
CLASS R
-------------
APRIL 30,
2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
---------------------------------------------------------------------------
Net asset value, beginning of period $10.56
---------------------------------------------------------------------------
Net investment income --
===========================================================================
Net asset value, end of period $10.56
___________________________________________________________________________
===========================================================================
Total return --
___________________________________________________________________________
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 10
___________________________________________________________________________
===========================================================================
Ratio of expenses to average net assets --
===========================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________
===========================================================================
Portfolio turnover rate(a) 11%
___________________________________________________________________________
===========================================================================
|
(a) Not annualized for a period of less than one year.
FS-42
NOTE 9--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
APRIL 30,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.56
-----------------------------------------------------------------------------------
Net investment income --
===================================================================================
Net asset value, end of period $10.56
___________________________________________________________________________________
===================================================================================
Total return --
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 38
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets --
===================================================================================
Ratio of net investment income to average net assets --
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(a) 11%
___________________________________________________________________________________
===================================================================================
|
(a) Not annualized for a period of less than one year.
NOTE 10--LEGAL PROCEEDINGS
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("IFG"), was formerly the investment advisor to the INVESCO Funds. AIM succeeded IFG as the investment advisor to the INVESCO Funds other than INVESCO Variable Investment Funds, Inc. ("IVIF") on November 25, 2003, and succeeded IFG as the investment advisor to IVIF on April 30, 2004.
The mutual fund industry as a whole is currently subject to a wide range of inquiries and litigation related to a wide range of issues, including issues of "market timing" and "late trading." Both AIM and IFG are the subject of a number of such inquiries, as described below.
Regulatory Actions and Inquiries Concerning IFG
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and the Office of the Attorney General of the State of New York ("NYAG") filed civil proceedings against IFG and Raymond R. Cunningham, in his capacity as the Chief Executive Officer of IFG. Mr. Cunningham also currently holds the positions of Chief Operating Officer and Senior Vice President of A I M Management Group Inc. ("AIM Management"), the parent of AIM, and the position of Senior Vice President of AIM. As of April 23, 2004, Mr. Cunningham was granted a voluntary administrative leave of absence with pay. In addition, on December 2, 2003, the State of Colorado filed civil proceedings against IFG. Neither the Fund nor any of the other AIM or INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint alleges that IFG failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds' independent directors that IFG had entered into certain arrangements permitting market timing of the INVESCO Funds. The SEC is seeking injunctions, including permanent injunctions from serving as an investment advisor, officer or director of an investment company; an accounting of all market timing as well as certain fees and compensation received; disgorgement; civil monetary penalties; and other relief.
The NYAG and Colorado complaints made substantially similar allegations. The NYAG is seeking injunctions, including permanent injunctions from directly or indirectly selling or distributing shares of mutual funds; disgorgement of all profits obtained, including fees collected, and payment of all restitution and damages caused, directly or indirectly from the alleged illegal activities; civil monetary penalties; and other relief. The State of Colorado is seeking injunctions; restitution, disgorgement and other equitable relief; civil monetary penalties; and other relief.
In addition, IFG has received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the INVESCO Funds. These regulators include the Florida Department of Financial Services, the Commissioner of Securities for the State of Georgia, the Office of the State Auditor for the State of West Virginia, the Office of the Secretary of State for West Virginia, the Colorado Securities Division and the Bureau of Securities of the State of New Jersey. IFG has also received more limited inquiries from the United States Department of Labor ("DOL"), the NASD, Inc. ("NASD"), the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific INVESCO Funds, entities and/or individuals. IFG is providing full cooperation with respect to these inquiries.
Regulatory Inquiries Concerning AIM
AIM has also received inquiries in the form of subpoenas or other oral or written requests for information from various regulators concerning market timing activity, late trading, fair value pricing and other related issues concerning the AIM Funds. AIM has received requests for information and documents concerning these and related matters from the SEC, the Massachusetts Secretary of the Commonwealth, the Office of the State Auditor for the State of West Virginia and the Department of Banking for the State of Connecticut. In addition, AIM has received subpoenas concerning these and related
FS-43
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
matters from the NYAG, the United States Attorney's Office for the District of Massachusetts, the Commissioner of Securities for the State of Georgia, the Office of the Secretary of State for West Virginia and the Bureau of Securities of the State of New Jersey. AIM has also received more limited inquiries from the DOL, the NASD, the SEC and the United States Attorney's Office for the Southern District of New York concerning certain specific AIM Funds, entities and/or individuals. AIM is providing full cooperation with respect to these inquiries.
Response of AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM. AMVESCAP found, in its ongoing review of these matters, that shareholders were not always effectively protected from the potential adverse impact of market timing and illegal late trading through intermediaries. These findings were based, in part, on an extensive economic analysis by outside experts who have been retained by AMVESCAP to examine the impact of these activities. In light of these findings, AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders thereof, harmed by these activities will receive full restitution. AMVESCAP has informed regulators of these findings. In addition, AMVESCAP has retained separate outside counsel to undertake a comprehensive review of AIM's and IFG's policies, procedures and practices, with the objective that they rank among the most effective in the fund industry. At the direction of the trustees of the AIM and INVESCO Funds, AMVESCAP will pay all of the expenses incurred by the AIM and INVESCO Funds related to market timing, including expenses incurred in connection with the pending regulatory complaints against IFG alleging market timing and the ongoing market timing investigations with respect to IFG and AIM.
For the period ended April 30, 2004, AMVESCAP has assumed $11,295 of expenses incurred by the Fund in connection with these matters, including legal, audit, shareholder servicing, communication and trustee expenses.
There can be no assurance that AMVESCAP will be able to reach a satisfactory settlement with the regulators, or that any such settlement will not include terms which would have the effect of barring either or both of IFG and AIM, or any other investment advisor directly or indirectly owned by AMVESCAP, including but not limited to A I M Capital Management, Inc., AIM Funds Management Inc., INVESCO Global Asset Management (N.A.), Inc., INVESCO Institutional (N.A.), Inc. ("IINA") and INVESCO Senior Secured Management, Inc., from serving as an investment advisor to any investment company registered under the Investment Company Act of 1940 (a "registered investment company"), including the Fund. The Fund has been informed by AIM that, if AIM is so barred, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There can be no assurance that such exemptive relief will be granted. Any settlement with the regulators could also include terms which would bar Mr. Cunningham from serving as an officer or director of any registered investment company.
Private Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending
on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG, AIM, AIM
Management, AMVESCAP, certain related entities and certain of their officers,
including Mr. Cunningham) making allegations substantially similar to the
allegations in the regulatory complaints against IFG described above. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of the Employee Retirement Income Security
Act ("ERISA"); (iii) breach of fiduciary duty; and/or (iv) breach of contract.
These lawsuits have been filed in both Federal and state courts and seek such
remedies as compensatory damages; restitution; rescission; accounting for
wrongfully gotten gains, profits and compensation; injunctive relief;
disgorgement; equitable relief; various corrective measures under ERISA;
rescission of certain Funds' advisory agreements; declaration that the advisory
agreement is unenforceable or void; refund of advisory fees; interest; and
attorneys' and experts' fees.
IFG has removed certain of the state court proceedings to Federal District Court. The Judicial Panel on Multidistrict Litigation (the "Panel") has ruled that all actions pending in Federal court that allege market timing and/or late trading be transferred to the United States District Court for the District of Maryland for coordinated pre-trial proceedings. Some of the cases against IFG and the other AMVESCAP defendants have already been transferred to the District of Maryland in accordance with the Panel's directive. AIM and IFG anticipate that in time most or all of the actions pending against them and the other AMVESCAP defendants alleging market timing and/or late trading will be transferred to the multidistrict litigation.
Other Private Actions
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, IINA, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale. Certain of these lawsuits also allege that the defendants adopted unlawful distribution plans. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have been filed in both Federal and state courts and seek such remedies as damages; injunctive relief; rescission of certain Funds' advisory agreements and distribution plans; interest; prospective relief in the form of reduced fees; and attorneys' and experts' fees.
Certain other civil class action lawsuits have been filed against various parties (including, depending on the lawsuit, certain INVESCO Funds, certain AIM Funds, IFG and AIM) alleging that certain AIM and INVESCO Funds inadequately employed fair value pricing. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violations of various provisions of the Federal securities laws; (ii) breach of duty; and (iii) common law negligence and gross negligence. These lawsuits have been filed in both Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs.
FS-44
NOTE 10--LEGAL PROCEEDINGS (CONTINUED)
Additional lawsuits or regulatory actions arising out of the circumstances above and presenting similar allegations and requests for relief may be served or filed against the Fund, IFG, AIM, AIM Management, IINA, AIM Distributors, INVESCO Distributors, AMVESCAP and related entities and individuals in the future.
As a result of the above developments, investors in the AIM and INVESCO Funds might react by redeeming their investments. This might require the Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the Funds.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the matters described above may have on the Fund or AIM.
FS-45
PART C
OTHER INFORMATION
Item 22. Exhibits
a - (a) Amended and Restated Agreement and Declaration of Trust of
Registrant, dated May 15, 2002.(8)
- (b) Amendment No. 1, dated May 15, 2002,(effective as of July
1, 2002), to Amended and Restated Agreement and Declaration of
Trust of Registrant.(8)
- (c) Amendment No. 2, dated August 8, 2002, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(8)
- (d) Amendment No. 3, dated September 23, 2002, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(9)
- (e) Amendment No. 4, dated February 6, 2003 (effective as of
February 28, 2002), to Amended and Restated Agreement and
Declaration of Trust of Registrant.(9)
- (f) Amendment No. 5, dated June 11, 2003, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(10)
- (g) Amendment No. 6, dated June 23, 2003, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(10)
- (h) Amendment No. 7, dated June 11, 2003, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(10)
- (i) Amendment No. 8, dated September 16, 2003, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(11)
- (j) Amendment No. 9, dated December 10, 2003, to Amended and
Restated Agreement and Declaration of Trust of Registrant.(12)
b - Amended and Restated By-Laws of Registrant, adopted effective
May 15, 2002.(8)
c - Articles II, VI, VII, VIII and IX of the Amended and Restated
Agreement and Declaration of Trust, as amended, and Articles
IV, V and VI, of the Amended and Restated By-Laws, as
previously filed, define rights of holders of shares.
d (1) - (a) Master Investment Advisory Agreement, dated September 11,
2000, between Registrant and A I M Advisors, Inc.(5)
- (b) Amendment No. 1, dated September 1, 2001, to the Master
Investment Advisory Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.(6)
- (c) Amendment No. 2, dated December 28, 2001, to the Master
Investment Advisory Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.(7)
|
- (d) Amendment No. 3, dated July 1, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(8)
- (e) Amendment No. 4, dated September 23, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (f) Amendment No. 5, dated November 1, 2002, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (g) Amendment No. 6, dated February 28, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (h) Amendment No. 7, dated June 23, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(10)
- (i) Amendment No. 8, dated November 3, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(12)
- (j) Amendment No. 9, dated November 24, 2003, to the Master Investment Advisory Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(13)
(2) - Master Intergroup Sub-Advisory Contract for Mutual Funds,
dated November 4, 2003, between A I M Advisors, Inc. and AIM
Funds Management Inc.(12)
e (1) - (a) Amended and Restated Master Distribution Agreement (all
classes of shares except Class B shares), dated August 18,
2003, between Registrant and A I M Distributors, Inc.(11)
- (b) Amendment No. 1, dated October 29, 2003, to the Amended
and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(12)
- (c) Amendment No. 2, dated November 4, 2003, to the Amended
and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 20, 2003, to the Amended
and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(12)
- (e) Amendment No. 4, dated November 24, 2003, to the Amended
and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(12)
- (f) Amendment No. 5, dated November 25, 2003, to the Amended
and Restated Master Distribution Agreement (all classes of
shares except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.(12)
|
- (g) Amendment No. 6, dated January 6, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13)
- (h) Amendment No. 7, dated March 31, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13)
- (i) Amendment No. 8, dated April 30, 2004, to the Amended and Restated Master Distribution Agreement (all classes of shares except Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13)
(2) - (a) Amended and Restated Master Distribution Agreement (Class
B shares) dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(11)
- (b) Amendment No. 1, dated October 1, 2003, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated
August 18, 2003, between Registrant and A I M Distributors,
Inc.(12)
- (c) Amendment No. 2, dated October 29, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 3, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (e) Amendment No. 4, dated November 4, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (f) Amendment No. 5, dated November 20, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (g) Amendment No. 6, dated November 24, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (h) Amendment No. 7, dated November 25, 2003, to the Amended
and Restated Master Distribution Agreement (Class B shares),
dated August 18, 2003, between Registrant and A I M
Distributors, Inc.(12)
- (i) Amendment No. 8, dated March 31, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated
August 18, 2003, between Registrant and A I M Distributors,
Inc.(13)
|
- (j) Amendment No. 9, dated April 30, 2004, to the Amended and Restated Master Distribution Agreement (Class B shares), dated August 18, 2003, between Registrant and A I M Distributors, Inc.(13)
(3) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers.(5)
(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, as
amended, March 7, 2000, September 28, 2001 and September 26,
2002.(9)
g (1) - (a) Master Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust Company.(5)
- (b) Amendment, dated May 1, 2000, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State
Street Bank and Trust Company.(5)
- (c) Amendment, dated June 29, 2001, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State
Street Bank and Trust Company.(7)
- (d) Amendment, dated April 2, 2002, to the Master Custodian
Contract, dated May 1, 2000, between Registrant and State
Street Bank and Trust Company.(8)
(2) - (a) Subcustodian Agreement, dated September 9, 1994, between
Registrant, Texas Commerce Bank National Association, State
Street Bank and Trust Company and A I M Fund Services, Inc.
(now known as AIM Investment Services, Inc.)(6)
- (b) Amendment No. 1, dated October 2, 1998, to the
Subcustodian Agreement, dated September 9, 1994, between
Registrant, Chase Bank of Texas, N.A. (formerly Texas Commerce
Bank National Association), State Street Bank and Trust
Company and A I M Fund Services, Inc. (now known as AIM
Investment Services, Inc.)(6)
- (c) Amendment No. 2, dated March 15, 2002, to the Subcustodian
Agreement, dated September 9, 1994, between Registrant,
JPMorgan Chase Bank (formerly Chase Bank of Texas, N.A., State
Street Bank and Trust Company and A I M Fund Services, Inc.
(now known as AIM Investment Services, Inc.)(8)
(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 May 31, 2002,
between Registrant and A I M Advisors, Inc.(7)
h (1) - (a) Transfer Agency and Service Agreement, dated July 1, 2004,
between Registrant and AIM Investment Services, Inc.(13)
(2) - (a) Master Administrative Services Agreement, dated September
11, 2000, between Registrant and A I M Advisors, Inc.(5)
- (b) Amendment No. 1, dated September 1, 2001, to the Master
Administrative Services Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.(6)
|
- (c) Amendment No. 2, dated December 28, 2001, to the Master Administrative Services Agreement, dated September 11, 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 September 11, 2000, between Registrant and A I M Advisors, Inc.(8)
- (e) Amendment No. 4, dated September 23, 2002, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (f) Amendment No. 5, dated November 1, 2002, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (g) Amendment No. 6, dated February 28, 2003, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(9)
- (h) Amendment No. 7, dated June 23, 2003, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(10)
- (i) Amendment No. 8, dated November 3, 2003, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(12)
- (j) Amendment No. 9, dated November 24, 2003, to the Master Administrative Services Agreement, dated September 11, 2000, between Registrant and A I M Advisors, Inc.(13)
- (k) Amended and Restated Master Administrative Services Agreement, dated July 1, 2004, between Registrant and A I M Advisors, Inc.(13)
(3) - Memorandum of Agreement, regarding securities lending, dated
September 11, 2000, between Registrant (on behalf of all
Funds) and A I M Advisors, Inc.(7)
(4) - Memorandum of Agreement, regarding expense limitations, dated
July 1, 2003, between Registrant (on behalf of AIM Developing
Markets Fund) and A I M Advisors, Inc.(10)
(5) - Interfund Loan Agreement, dated September 18, 2001, between
Registrant and A I M Advisors, Inc.(6)
(6) - Expense Reimbursement Agreement, dated June 30, 2003, between
Registrant and A I M Fund Services, Inc. (now known as AIM
Investment Services, Inc.).(13)
|
i - Consent of Ballard Spahr Andrews & Ingersoll, LLP.(13)
j - Consent of PricewaterhouseCoopers LLP.(13)
k - Financial Statements - None.
l (1) - Agreement Concerning Initial Capitalization of Registrant's
AIM Libra Fund, dated October 31, 2002.(9)
(2) - Agreement Concerning Initial Capitalization of Registrant's
AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark
Small Companies Fund dated November 3, 2003.(12)
m (1) - (a) Amended and Restated Master Distribution Plan (Class A
Shares), effective as of August 18, 2003.(11)
- (b) Amendment No. 1, dated October 29, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class A Shares).(12)
- (c) Amendment No. 2, dated November 4, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class A Shares).(12)
- (d) Amendment No. 3, dated November 20, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class A Shares).(12)
- (e) Amendment No. 4, dated November 24, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class A Shares).(12)
- (f) Amendment No. 5, dated November 25, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class A Shares).(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A
Shares).(13)
|
- (h) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class A Shares).(13)
(2) - (a) Amended and Restated Master Distribution Plan (Class B
Shares) (Securitization Feature), effective as of August 18,
2003.(11)
- (b) Amendment No. 1, dated October 29, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class B Shares) (Securitization Feature).(12)
- (c) Amendment No. 2, dated November 4, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class B Shares) (Securitization Feature).(12)
- (d) Amendment No. 3, dated November 20, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class B Shares) (Securitization Feature).(12)
- (e) Amendment No. 4, dated November 24, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class B Shares) (Securitization Feature).(12)
- (f) Amendment No. 5, dated November 25, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class B Shares) (Securitization Feature).(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(13)
|
- (h) Amendment No. 7, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature).(13)
(3) - (a) Amended and Restated Master Distribution Plan (Class C
Shares), effective as of August 18, 2003.(11)
- (b) Amendment No. 1, dated October 29, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class C Shares).(12)
- (c) Amendment No. 2, dated November 4, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class C Shares).(12)
- (d) Amendment No. 3, dated November 20, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class C Shares).(12)
- (e) Amendment No. 4, dated November 24, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class C Shares).(12)
- (f) Amendment No. 5, dated November 25, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class C Shares).(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C
Shares).(13)
|
- (h) Amendment No. 7, dated April 30, 2004, to the Registrant's Amended and Restated Master Distribution Plan (Class C Shares).(13)
(4) - (a) Amended and Restated Master Distribution Plan (Class R
shares), effective as of August 18, 2003.(11)
- (b) Amendment No. 1, dated November 4, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class R Shares).(12)
- (c) Amendment No. 2, dated November 24, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class R Shares).(12)
- (d) Amendment No. 3, dated November 25, 2003, to the
Registrant's Amended and Restated Master Distribution Plan
(Class R Shares).(12)
- (e) Amendment No. 4, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class R
Shares).(13)
(5) - Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Class A Shares).(10)
(6) - Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Class C Shares).(10)
(7) - Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Class R Shares).(10)
n (1) Fifth Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R), effective December 12, 2001, as amended
and restated March 4, 2002, as amended and restated October
31, 2002, as further amended and restated effective July 21,
2003 and as further amended and restated effective August 18,
2003, and as further amended and restated effective May 12,
2004.(13)
o - Reserved.
|
p (1) - A I M Management Group Inc. Code of Ethics, adopted May 1,
1981, as last amended June 10, 2003, 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 Registrant, effective September 28, 2000.(5)
----------
|
(1) Incorporated herein by reference to PEA No. 55, filed on August 26, 1998.
(2) Incorporated herein by reference to PEA No. 56, filed on December 30, 1998.
(3) Incorporated herein by reference to PEA No. 57, filed on February 22, 1999.
(4) Incorporated herein by reference to PEA No. 58, filed on February 24, 2000.
(5) Incorporated herein by reference to PEA No. 59, filed on February 28, 2001.
(6) Incorporated herein by reference to PEA No. 60, filed on October 12, 2001.
(7) Incorporated herein by reference to PEA No. 61, filed on January 30, 2002.
(8) Incorporated herein by reference to PEA No. 62, filed on August 14, 2002.
(9) Incorporated herein by reference to PEA No. 63, filed on February 20, 2003.
(10) Incorporated herein by reference to PEA No. 64, filed on August 20, 2003.
(11) Incorporated herein by reference to PEA No. 65, filed on October 10, 2003.
(12) Incorporated herein by reference to PEA No. 66, filed on February 25, 2004.
(13) Filed herewith electronically.
Item 23. Persons Controlled by or Under Common Control With
the Fund
None.
Item 24. Indemnification
The Registrant's Amended and Restated Agreement and
Declaration of Trust, 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 solely by reason of
being or having been shareholders of the Registrant or any
portfolio or class and not because of their acts or
omissions or for some other reason.
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 $55,000,000 limit of liability (an additional $10,000,000 coverage applies to independent directors/trustees only).
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.
Section 7 of the Master Intergroup Sub-Advisory Contract for Mutual Funds (the "Sub-Advisory Contract") between AIM and AIM Funds Management Inc. provides that the Sub-advisor shall not be liable for any costs or liabilities arising from any error of judgment or mistake of law or any loss suffered by any series of the Registrant or the Registrant in connection with the matters to which the Sub-Advisory Contract relates except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Sub-advisor in the performance by the Sub-advisor of its duties or from reckless disregard by the Sub-advisor of its obligations and duties under the Sub-Advisory Contract.
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, such indemnification by it is against public policy, as expressed in the Act and be governed by final adjudication of such issue.
Item 25. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of AIM's directors and officers is with AIM and its affiliated companies. For information as to the business, profession, vocation or employment of a substantial nature of each of the officers and directors of AIM Funds Management Inc., reference is made to Form ADV filed under the Investment Advisers Act of 1940 by AIM Funds Management Inc., herein incorporated by reference. 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 26(b) of this
Part C.
Item 26. 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 Combination Stock & Bond Funds
AIM Counselor Series Trust
AIM Equity Funds
AIM Floating Rate Fund
AIM Funds Group
AIM Growth Series
AIM International Mutual Funds
AIM Investment Securities Funds
AIM Sector Funds
AIM Special Opportunities Funds
AIM Stock Funds
AIM Summit Fund
AIM Tax-Exempt Funds
AIM Treasurer's Series Trust
AIM Variable Insurance Funds
(b) The following table sets forth information with respect to
each director, officer or partner of A I M Distributors,
Inc.
|
Name and Principal Position and Officers with Positions and Offices
Business Address* Underwriter with Registrant
----------------- ----------- ---------------
Gene L. Needles Chairman, Director, President and None
Chief Executive Officer
Mark H. Williamson Director Trustee and Executive Vice President
John S. Cooper Executive Vice President None
James L. Salners Executive Vice President None
Marilyn M. Miller Executive Vice President None
James E. Stueve Executive Vice President None
Glenda A. Dayton Senior Vice President None
Ivy B. McLemore Senior Vice President None
David J. Nardecchia Senior Vice President None
Margaret A. Vinson Senior Vice President None
Gary K. Wendler Senior Vice President None
Stephen H. Bitteker First Vice President None
Kevin M. Carome Vice President Senior Vice President, Secretary and
Chief Legal Officer
|
Name and Principal Position and Officers with Positions and Offices
Business Address* Underwriter with Registrant
----------------- ----------- ---------------
Mary A. Corcoran Vice President None
Rhonda Dixon-Gunner 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
Norman W. Woodson Vice President None
Rebecca Starling-Klatt Assistant Vice President & Chief None
Compliance Officer
Kathleen J. Pflueger Secretary Assistant Secretary
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) None.
Item 27. Location of Accounts and Records
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173, will maintain physical possession of each
such account, book or other document of the Registrant at its
principal executive offices, except for those maintained by the
Registrant's Custodian, State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110, and the
Registrant's Transfer Agent and Dividend Paying Agent, AIM
Investment Services, Inc. (formerly, A I M Fund Services,
Inc.), P.O. Box 4739, Houston, Texas 77210-4739.
Item 28. Management Services
None.
Item 29. Undertakings
Not applicable.
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 31st day of August, 2004.
REGISTRANT: AIM INVESTMENT FUNDS
By: /s/ Robert H. Graham
Robert H. Graham, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Robert H. Graham Chairman, Trustee & President August 31, 2004
-------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ Bob R. Baker* Trustee
--------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee
--------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee
--------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Trustee
--------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee
--------------------------
(Albert R. Dowden)
/s/ Edward K. Dunn, Jr.* Trustee
--------------------------
(Edward K. Dunn, Jr.)
/s/ Jack M. Fields* Trustee
--------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee
--------------------------
(Carl Frischling)
/s/ Gerald J. Lewis* Trustee
--------------------------
(Gerald J. Lewis)
/s/ Prema Mathai-Davis* Trustee
--------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee
--------------------------
(Lewis F. Pennock)
/s/ Ruth H. Quigley* Trustee
--------------------------
(Ruth H. Quigley)
|
/s/ Louis S. Sklar* Trustee
--------------------------
(Louis S. Sklar)
/s/ Larry Soll* Trustee
--------------------------
(Larry Soll)
/s/ Mark H. Williamson* Trustee & Executive Vice President
--------------------------
(Mark H. Williamson)
Vice President & Treasurer (Principal August 31, 2004
/s/ Sidney M. Dilgren Financial and Accounting Officer)
--------------------------
(Sidney M. Dilgren)
*By /s/ Robert H. Graham
--------------------------
Robert H. Graham
Attorney-in-Fact
|
* Original Powers of Attorney authorizing Robert H. Graham and Kevin M. Carome, and each of them, to execute this Registration Statement of the Registrant on behalf of the above-named trustees and officers of the Registrant (with the exception of Bob R. Baker, James T. Bunch, Gerald J. Lewis and Larry Soll) have been filed with the Securities and Exchange Commission with the Registration Statement of AIM Variable Insurance Funds on Form N-14 on December 31, 2003 and original Powers of Attorney for Bob R. Baker, James T. Bunch, Gerald J. Lewis and Larry Soll have been filed with the Securities and Exchange Commission with the Registration Statement of INVESCO Variable Investment Funds, Inc. on Form N-14 on December 31, 2003 and hereby are incorporated by reference.
INDEX
Exhibit
Number Description
------- -----------
d(j) Amendment No. 9, dated November 24, 2003, to the Master
Investment Advisory Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.
e(1)(g) Amendment No. 6, dated January 6, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares
except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.
e(1)(h) Amendment No. 7, dated March 31, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares
except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.
e(1)(i) Amendment No. 8, dated April 30, 2004, to the Amended and
Restated Master Distribution Agreement (all classes of shares
except Class B shares), dated August 18, 2003, between
Registrant and A I M Distributors, Inc.
e(2)(i) Amendment No. 8, dated March 31, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated
August 18, 2003, between Registrant and A I M Distributors,
Inc.
e(2)(j) Amendment No. 9, dated April 30, 2004, to the Amended and
Restated Master Distribution Agreement (Class B shares), dated
August 18, 2003, between Registrant and A I M Distributors,
Inc.
h(1) Transfer Agency and Service Agreement, dated July 1, 2004,
between Registrant and AIM Investment Services, Inc.
h(2)(j) Amendment No. 9, dated November 24, 2003, to the Master
Administrative Services Agreement, dated September 11, 2000,
between Registrant and A I M Advisors, Inc.
h(2)(k) Amended and Restated Master Administrative Services Agreement,
dated July 1, 2004, between Registrant and A I M Advisors,
Inc.
h(6) Expense Reimbursement Agreement, dated June 30, 2003, between
Registrant and A I M Fund Services, Inc. (now known as AIM
Investment Services, Inc.)
i Consent of Ballard Spahr Andrews & Ingersoll, LLP
j Consent of PricewaterhouseCoopers LLP
m(1)(g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares)
m(1)(h) Amendment No. 7, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class A Shares)
m(2)(g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature)
|
INDEX
Exhibit
Number Description
------- -----------
m(2)(h) Amendment No. 7, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class B Shares)
(Securitization Feature)
m(3)(g) Amendment No. 6, dated March 31, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares)
m(3)(h) Amendment No. 7, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class C Shares)
m(4)(e) Amendment No. 4, dated April 30, 2004, to the Registrant's
Amended and Restated Master Distribution Plan (Class R Shares)
n(1) Fifth Amended and Restated Multiple Class Plan of The AIM
Family of Funds(R), effective December 12, 2001, as amended
and restated March 4, 2002, as amended and restated October
31, 2002, as further amended and restated effective July 21,
2003 and as further amended and restated effective August 18,
2003, and as further amended and restated effective May 12,
2004
|
AMENDMENT NO. 9
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of November 24, 2003, amends the Master Investment Advisory Agreement (the "Agreement"), dated September 11, 2000, between AIM Investment Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to delete AIM Global Energy Fund, AIM Global Financial Services Fund and AIM Global Science and Technology Fund from the Agreement;
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 Developing Markets Fund September 1, 2001 AIM Global Health Care Fund September 1, 2001 AIM Libra Fund November 1, 2002 AIM Trimark Endeavor Fund November 3, 2003 AIM Trimark Fund November 3, 2003 AIM Trimark Small Companies Fund November 3, 2003 |
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 DEVELOPING MARKETS FUND
AIM GLOBAL HEALTH CARE FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $500 million................................................................................... 0.975% Next $500 million.................................................................................... 0.95% Next $500 million.................................................................................... 0.925% On amounts thereafter................................................................................ 0.90% |
AIM TRIMARK ENDEAVOR FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.80% On amounts thereafter................................................................................ 0.75% |
AIM LIBRA FUND
AIM TRIMARK FUND
AIM TRIMARK SMALL COMPANIES FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $1 billion..................................................................................... 0.85% On amounts thereafter................................................................................ 0.80%" |
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 INVESTMENT FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
--------------------------- ------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
--------------------------- ------------------------------
Assistant Secretary Mark H. Williamson
President
|
(SEAL)
AMENDMENT NO. 6
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (all Classes of shares except Class B Shares) (the "Agreement") made as of the 18th day of August, 2003, by and between each registered investment company set forth on Schedule A to the Agreement (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A to the Agreement, (each, a "Portfolio"), with respect to each class of shares except Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor") is hereby amended as follows:
The Agreement is amended (1) effective August 18, 2003, with respect to the Portfolios of AIM Growth Series, AIM Investment Funds, AIM Investment Securities Funds and AIM Special Opportunities Funds and (2) effective January 6, 2004, with respect to the Portfolios of AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM International Mutual Funds, AIM Sector Funds, AIM Stock Funds and AIM Tax-Exempt Funds and AIM Treasurer's Series Trust (AIM Stable Value Fund only) by adding the following sentence as the last sentence of Section FIFTH of the Agreement:
"The Distributor or such other investment dealers or financial institutions will be deemed to have performed all services required to be performed in order to be entitled to receive the asset based sales charge portion of any amounts payable with respect to Class A, Class A3, Class C, Class K, Class R and Investor Class Shares to the Distributor pursuant to a distribution plan adopted by the Fund on behalf of each Portfolio pursuant to Rule 12b-1 under the 1940 Act upon the settlement of each sale of a Class A, Class A3, Class C, Class K, Class R or Investor Class Share (or a share of another portfolio from which such Share derives)."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: January 6, 2004
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF OF THE
SHARES OF EACH PORTFOLIO LISTED ON SCHEDULE A
By: /s/ ROBERT H. GRAHAM
---------------------------------------------
Robert H. Graham
President
|
A I M DISTRIBUTORS, INC.
By: /s/ GENE L. NEEDLES
---------------------------------------------
Gene L. Needles
President
|
AMENDMENT NO. 7
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (all Classes of shares except Class B Shares) (the "Agreement") made as of the 18th day of August, 2003, by and between each registered investment company set forth on Schedule A to the Agreement (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A to the Agreement, (each, a "Portfolio"), with respect to each class of shares except Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor") is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
INVESCO Core Equity Fund - Class A
Class C
Class K
Investor Class
INVESCO Total Return Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM COUNSELOR SERIES TRUST
INVESCO Advantage Health Sciences Fund - Class A
Class C
INVESCO Multi-Sector Fund - Class A
Class C
AIM EQUITY FUNDS
AIM Aggressive Growth Fund - Class A
Class C
Class R
Institutional Class
AIM Basic Value II Fund - Class A
Class C
|
AIM Blue Chip Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Capital Development Fund - Class A
Class C
Class R
Institutional Class
AIM Charter Fund - Class A
Class C
Class R
Institutional Class
AIM Constellation Fund - Class A
Class C
Class R
Institutional Class
AIM Core Strategies Fund - Class A
Class C
AIM Dent Demographic Trends Fund - Class A
Class C
AIM Diversified Dividend Fund - Class A
Class C
AIM Emerging Growth Fund - Class A
Class C
AIM Large Cap Basic Value Fund - Class A
Class C
Class R
Investor Class
AIM Large Cap Growth Fund - Class A
Class C
Class R
Investor Class
AIM Mid Cap Growth Fund - Class A
Class C
Class R
AIM U.S. Growth Fund - Class A
Class C
2
|
AIM Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Balanced Fund - Class A
Class C
Class R
Institutional Class
AIM Basic Balanced Fund - Class A
Class C
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Emerging Growth Fund - Class A
Class C
AIM Mid Cap Basic Value Fund - Class A
Class C
AIM Premier Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Select Equity Fund - Class A
Class C
AIM Small Cap Equity Fund - Class A
Class C
Class R
AIM GROWTH SERIES
AIM Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Mid Cap Core Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Small Cap Growth Fund - Class A
Class C
Class R
Institutional Class
3
|
AIM Global Equity Fund - Class A
Class C
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund - Class A
Class C
AIM European Growth Fund - Class A
Class C
Class R
Investor Class
AIM Global Aggressive Growth Fund - Class A
Class C
AIM Global Growth Fund - Class A
Class C
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
INVESCO International Core Equity Fund - Class A
Class C
Class R
Investor Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
AIM Libra Fund - Class A
Class C
AIM Trimark Endeavor Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Small Companies Fund - Class A
Class C
Class R
Institutional Class
4
|
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund - Class A
Class C
Investor Class
AIM Income Fund - Class A
Class C
Class R
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Investor Class
AIM Limited Maturity Treasury Fund - Class A
Class A3
Institutional Class
AIM Money Market Fund - AIM Cash Reserve Shares
Class C
Class R
Investor Class
AIM Municipal Bond Fund - Class A
Class C
Investor Class
AIM Short Term Bond Fund - Class C
AIM Total Return Bond Fund - Class A
Class C
AIM Real Estate Fund - Class A
Class C
Investor Class
AIM SECTOR FUNDS
INVESCO Energy Fund - Class A
Class C
Class K
Investor Class
INVESCO Financial Services Fund - Class A
Class C
Class K
Investor Class
INVESCO Gold & Precious Metals Fund - Class A
Class C
Investor Class
5
|
INVESCO Health Science Fund - Class A
Class C
Class K
Investor Class
INVESCO Leisure Fund - Class A
Class C
Class K
Investor Class
INVESCO Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Utilities Fund - Class A
Class C
Investor Class
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A
Class C
AIM Opportunities II Fund - Class A
Class C
AIM Opportunities III Fund - Class A
Class C
AIM STOCK FUNDS
INVESCO Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Mid-Cap Growth Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Small Company Growth Fund - Class A
Class C
Class K
Investor Class
INVESCO S&P 500 Index Fund - Institutional Class
Investor Class
6
|
AIM TAX-EXEMPT FUND
AIM High Income Municipal Fund - Class A
Class C
AIM Tax-Exempt Cash Fund - Class A
Investor Class
AIM Tax-Free Intermediate Fund - Class A
Class A3
AIM TREASURER'S SERIES TRUST
INVESCO Stable Value Fund - Class R
Institutional Class
INVESCO U.S. Government Money Fund - Investor Class
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: March 31, 2004
EACH FUND (LISTED ON SCHEDULE A) ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A
By: /s/ Mark H. Williamson
-----------------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Gene L. Needles
President
|
AMENDMENT NO. 8 TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (all Classes of shares except Class B Shares) (the "Agreement") made as of the 18th day of August, 2003, by and between each registered investment company set forth on Schedule A to the Agreement (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A to the Agreement, (each, a "Portfolio"), with respect to each class of shares except Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor") is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(ALL CLASSES OF SHARES EXCEPT CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
INVESCO Core Equity Fund - Class A
Class C
Class K
Investor Class
INVESCO Total Return Fund - Class A
Class C
Class K
Institutional Class
Investor Class
AIM COUNSELOR SERIES TRUST
INVESCO Advantage Health Sciences Fund - Class A
Class C
INVESCO Multi-Sector Fund - Class A
Class C
Institutional Class
AIM EQUITY FUNDS
AIM Aggressive Growth Fund - Class A
Class C
Class R
Institutional Class
|
AIM Basic Value II Fund - Class A
Class C
AIM Blue Chip Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Capital Development Fund - Class A
Class C
Class R
Institutional Class
AIM Charter Fund - Class A
Class C
Class R
Institutional Class
AIM Constellation Fund - Class A
Class C
Class R
Institutional Class
AIM Core Strategies Fund - Class A
Class C
AIM Dent Demographic Trends Fund - Class A
Class C
AIM Diversified Dividend Fund - Class A
Class C
AIM Emerging Growth Fund - Class A
Class C
AIM Large Cap Basic Value Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Large Cap Growth Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Mid Cap Growth Fund - Class A
Class C
Class R
Institutional Class
2
|
AIM U.S. Growth Fund - Class A
Class C
AIM Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Balanced Fund - Class A
Class C
Class R
Institutional Class
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
AIM International Emerging Growth Fund - Class A
Class C
AIM Mid Cap Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Premier Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Select Equity Fund - Class A
Class C
AIM Small Cap Equity Fund - Class A
Class C
Class R
AIM GROWTH SERIES
AIM Aggressive Allocation Fund - Class A
Class C
Class R
Institutional Class
3
|
AIM Basic Value Fund - Class A
Class C
Class R
Institutional Class
AIM Conservative Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Global Equity Fund - Class A
Class C
Institutional Class
AIM Mid Cap Core Equity Fund - Class A
Class C
Class R
Institutional Class
AIM Moderate Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Small Cap Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INTERNATIONAL MUTUAL FUNDS
AIM Asia Pacific Growth Fund - Class A
Class C
AIM European Growth Fund - Class A
Class C
Class R
Investor Class
AIM Global Aggressive Growth Fund - Class A
Class C
AIM Global Growth Fund - Class A
Class C
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
4
|
INVESCO International Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
AIM Global Health Care Fund - Class A
Class C
AIM Libra Fund - Class A
Class C
AIM Trimark Endeavor Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Fund - Class A
Class C
Class R
Institutional Class
AIM Trimark Small Companies Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
AIM Income Fund - Class A
Class C
Class R
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Investor Class
AIM Limited Maturity Treasury Fund - Class A
Class A3
Institutional Class
5
|
AIM Money Market Fund - AIM Cash Reserve Shares
Class C
Class R
Institutional Class
Investor Class
AIM Municipal Bond Fund - Class A
Class C
Investor Class
AIM Real Estate Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Short Term Bond Fund - Class A
Class C
Class R
Institutional Class
AIM Total Return Bond Fund - Class A
Class C
Class R
Institutional Class
AIM SECTOR FUNDS
INVESCO Energy Fund - Class A
Class C
Class K
Investor Class
INVESCO Financial Services Fund - Class A
Class C
Class K
Investor Class
INVESCO Gold & Precious Metals Fund - Class A
Class C
Investor Class
INVESCO Health Science Fund - Class A
Class C
Class K
Investor Class
INVESCO Leisure Fund - Class A
Class C
Class K
Investor Class
6
|
INVESCO Technology Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Utilities Fund - Class A
Class C
Investor Class
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Opportunities I Fund - Class A
Class C
AIM Opportunities II Fund - Class A
Class C
AIM Opportunities III Fund - Class A
Class C
AIM STOCK FUNDS
INVESCO Dynamics Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Mid-Cap Growth Fund - Class A
Class C
Class K
Institutional Class
Investor Class
INVESCO Small Company Growth Fund - Class A
Class C
Class K
Investor Class
INVESCO S&P 500 Index Fund - Institutional Class
Investor Class
AIM TAX-EXEMPT FUNDS
AIM High Income Municipal Fund - Class A
Class C
AIM Tax-Exempt Cash Fund - Class A
Investor Class
AIM Tax-Free Intermediate Fund - Class A
Class A3
7
|
AIM TREASURER'S SERIES TRUST
INVESCO Stable Value Fund - Class R
Institutional Class
INVESCO U.S. Government Money Fund - Investor Class
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: April 30, 2004
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF
OF THE SHARES OF EACH PORTFOLIO LISTED ON
SCHEDULE A
By: /s/ Mark H. Williamson
----------------------------------------
Mark H. Williamson
Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
----------------------------------------
Gene L. Needles
President
|
AMENDMENT NO. 8
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (Class B Shares) (the "Agreement") made as of the 18th day of August 2003, by and between each registered investment company set forth on Schedule A-1 and Schedule A-2 to the Agreement (each individually referred to as the "Fund", or collectively, the "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A-1 and Schedule A-2 to the Agreement (each, a "Portfolio"), with respect to the Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"), is hereby amended as follows:
1. Schedule A-1 and Schedule A-2 to the Agreement are hereby deleted in their entirety and replaced with Schedule A-1 and Schedule A-2 attached to this amendment.
All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect.
Dated: March 31, 2004
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Name: Gene L. Needles
Title: President
|
SCHEDULE A-1
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM EQUITY FUNDS
PORTFOLIOS
AIM Aggressive Growth Fund
AIM Basic Value II Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Core Strategies Fund
AIM Dent Demographic Trends Fund
AIM Diversified Dividend Fund
AIM Emerging Growth Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM U.S. Growth Fund
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES
PORTFOLIOS
AIM Basic Value Fund
AIM Global Equity Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIOS
AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
INVESCO International Core Equity Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Libra Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM Total Return Bond Fund
AIM SPECIAL OPPORTUNITIES FUNDS
PORTFOLIOS
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM TAX-EXEMPT FUNDS
PORTFOLIO
AIM High Income Municipal Fund
SCHEDULE A-2
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIOS
INVESCO Core Equity Fund
INVESCO Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
INVESCO Advantage Health Sciences Fund
INVESCO Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund
INVESCO Utilities Fund
AIM STOCK FUNDS
PORTFOLIOS
INVESCO Dynamics Fund
INVESCO Mid-Cap Growth Fund
INVESCO Small Company Growth Fund
AMENDMENT NO. 9
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Amended and Restated Master Distribution Agreement (Class B Shares) (the "Agreement") made as of the 18th day of August, 2003, by and between each registered investment company set forth on Schedule A-1 and Schedule A-2 to the Agreement (each individually referred to as the "Fund", or collectively, the "Funds"), severally, on behalf of each of its series of common stock or beneficial interest, as the case may be, set forth on Schedule A-1 and Schedule A-2 to the Agreement (each, a "Portfolio"), with respect to the Class B Shares (the "Shares") of each Portfolio, and A I M DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"), is hereby amended as follows:
1. Schedule A-1 and Schedule A-2 to the Agreement are hereby deleted in their entirety and replaced with Schedule A-1 and Schedule A-2 attached to this amendment.
All other terms and provisions of the Agreement not amended hereby shall remain in full force and effect.
Dated: April 30, 2004
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Mark H. Williamson
-----------------------------------
Name: Mark H. Williamson
Title: Executive Vice President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene L. Needles
-----------------------------------
Name: Gene L. Needles
Title: President
|
SCHEDULE A-1
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM EQUITY FUNDS
PORTFOLIOS
AIM Aggressive Growth Fund
AIM Basic Value II Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Core Strategies Fund
AIM Dent Demographic Trends Fund
AIM Diversified Dividend Fund
AIM Emerging Growth Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM U.S. Growth Fund
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM Premier Equity Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES
PORTFOLIOS
AIM Aggressive Allocation Fund
AIM Basic Value Fund
AIM Conservative Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Small Cap Growth Fund
AIM Global Trends Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIOS
AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
INVESCO International Core Equity Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Libra Fund
AIM Trimark Fund
AIM Trimark Endeavor Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Total Return Bond Fund
AIM Real Estate Fund
AIM SPECIAL OPPORTUNITIES FUNDS
PORTFOLIOS
AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM TAX-EXEMPT FUNDS
PORTFOLIO
AIM High Income Municipal Fund
SCHEDULE A-2
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIOS
INVESCO Core Equity Fund
INVESCO Total Return Fund
AIM COUNSELOR SERIES TRUST
PORTFOLIOS
INVESCO Advantage Health Sciences Fund
INVESCO Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
INVESCO Energy Fund
INVESCO Financial Services Fund
INVESCO Gold & Precious Metals Fund
INVESCO Health Sciences Fund
INVESCO Leisure Fund
INVESCO Technology Fund
INVESCO Utilities Fund
AIM STOCK FUNDS
INVESCO Dynamics Fund
INVESCO Mid-Cap Growth Fund
INVESCO Small Company Growth Fund
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM INVESTMENT FUNDS
AND
AIM INVESTMENT SERVICES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT 3
ARTICLE 2 FEES AND EXPENSES 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND 6
ARTICLE 5 INDEMNIFICATION 6
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT 7
ARTICLE 7 TERMINATION OF AGREEMENT 8
ARTICLE 8 ADDITIONAL FUNDS 8
ARTICLE 9 LIMITATION OF SHAREHOLDER LIABILITY 8
ARTICLE 10 ASSIGNMENT 9
ARTICLE 11 AMENDMENT 9
ARTICLE 12 TEXAS LAW TO APPLY 9
ARTICLE 13 MERGER OF AGREEMENT 9
ARTICLE 14 COUNTERPARTS 9
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of July, 2004, by and between AIM Investment Funds, a Delaware statutory trust, having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Fund"), and AIM Investment Services, Inc., a Delaware corporation, having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and classes, with each such series representing interests in a separate portfolio of securities and other assets and each such class having different distribution arrangements; and
WHEREAS, the Fund on behalf of the retail and institutional share classes of each of the Portfolios thereof (the "Portfolios") desires to appoint the Transfer Agent as its transfer agent, and agent in connection with certain other activities, with respect to the Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Transfer Agent to act as, and the Transfer Agent agrees to act as, its transfer agent for the authorized and issued shares of beneficial interest of the Fund representing interests in the retail and institutional share classes of each of the respective Portfolios ("Shares"), dividend disbursing agent, and agent in connection with any accumulation or similar plans provided to shareholders of each of the Portfolios (the "Shareholders"), including without limitation any periodic investment plan or periodic withdrawal program, as provided in the currently effective prospectus and statement of additional information (the "Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following services:
(a) The Transfer Agent shall, in accordance with procedures established from time to time by agreement between the Fund on behalf of each of the Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund authorized pursuant to the Charter of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account;
(iii) receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the Fund;
(v) effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and distributions declared by the Fund on behalf of the Shares;
(vii) maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and maintain pursuant to SEC Rule 17Ad-1O(e) a record of the total number of Shares which are authorized, based upon data provided to it by the Fund, and issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which function shall be the sole responsibility of the Fund.
(b) In addition to the services set forth in the above paragraph (a), the Transfer Agent shall: perform the customary services of a transfer agent, including but not limited to maintaining all Shareholder accounts, mailing Shareholder reports and prospectuses to current Shareholders, preparing and mailing confirmation forms and statements of accounts to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in Article 1 may be established from time to time by agreement between the Fund on behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at times perform only a portion of these services and the other agents of the Fund may perform these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent fees as set forth in Schedule A, attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances incurred by the Transfer Agent for the items set forth in Schedule A. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Fund, will be reimbursed by the Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all fees and reimbursable expenses following the mailing of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Transfer Agent by the Fund at least seven (7) days prior to the mailing date of such materials.
2.04 The Transfer Agent may, from time to time, enter into certain sub-transfer agency, omnibus account service, sub-accounting, and networking agreements whereby a broker/dealer or third party agrees to provide individual shareholder and/or record keeping services with respect to investments in the Portfolios that would otherwise be required to be provided by the Transfer Agent hereunder. The types of accounts serviced through these arrangements may generally include (i) direct investments by individuals whose Shares are held in an omnibus account maintained with the Transfer Agent by a broker or sub-transfer agent; (ii) investments made through various types of retirement and college savings plans; and (iii) investments made through variable group annuities, funds of funds, and other investment vehicles which utilize the Funds as underlying investments. All fees payable under the sub-transfer agency, omnibus account service, sub-accounting, and networking agreements shall be an obligation of the Transfer Agent and not the Portfolios (with the exception of certain out-of-pocket expenses and advances identified under Section 2.02, above, and payments made with respect to the servicing of accounts invested in Institutional Class shares).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in Texas.
3.03 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a statutory trust duly organized and existing and in good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Agreement and Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as amended on behalf of each of the Portfolios is currently effective and will remain effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund shall on behalf of the applicable Portfolio, indemnify and hold the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or subcontractors of information, records and documents or services which (i) are received or relied upon by the Transfer Agent or its agents or subcontractors and/or furnished to it or performed by on behalf of the Fund, and (ii) have been prepared, maintained and/or performed by the Fund or any other person or firm on behalf of the Fund; provided such actions are taken in good faith and without negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Fund on behalf of the applicable Portfolio; provided such actions are taken in good faith and without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to any action or failure or omission to act by the Transfer Agent as result of the Transfer Agent's lack of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and the Transfer Agent and its agents or subcontractors shall not be liable to and shall be indemnified by the Fund on behalf of the applicable Portfolio for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Transfer Agent shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided to the Transfer Agent or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the Portfolios promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the Fund authorizing the appointment of the Transfer Agent and the execution and delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and By-Laws of the Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent relating to the
services to be performed by the Transfer Agent hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.
6.03 The Transfer Agent and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the Shareholder records of the Fund, the Transfer Agent will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Transfer Agent reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60) days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund on behalf of the applicable Portfolios. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of Shares in addition to the Portfolios with respect to which it desires to have the Transfer Agent render services as transfer agent under the terms hereof, it shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
ARTICLE 9
LIMITATION OF SHAREHOLDER LIABILITY
9.01 Notice is hereby given that this Agreement is being executed by the Fund by a duly authorized officer thereof acting as such and not individually. The obligations of this Agreement are not binding upon any of the trustees, officers, shareholders or the investment advisor of the Fund individually but are binding only upon the assets and property belonging to the Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which the trustees or directors have caused this Agreement to be executed.
ARTICLE 10
ASSIGNMENT
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
10.03 The Transfer Agent may, without further consent on the part of the Fund, subcontract for the performance hereof with any entity which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that the Transfer Agent shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions.
ARTICLE 11
AMENDMENT
11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Trustees of the Fund.
ARTICLE 12
TEXAS LAW TO APPLY
12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 13
MERGER OF AGREEMENT
13.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
ARTICLE 14
COUNTERPARTS
14.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
AIM INVESTMENT FUNDS
By: /s/ Robert H. Graham
-------------------------------
President
ATTEST:
/s/ Jim Coppedge
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Assistant Secretary
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AIM INVESTMENT SERVICES, INC.
By: /s/ Robert H. Graham
-------------------------------
President
ATTEST:
/s/ Jim Coppedge
------------------------------
Assistant Secretary
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SCHEDULE A
1. RETAIL SHARE CLASSES
OPEN ACCOUNT FEE. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares that are open during any monthly period at a rate of $17.08, whether such account is serviced directly by the Transfer Agent or by a third party pursuant to an omnibus account service, sub-accounting, or networking agreement, as provided in Section 2.04 of the Agreement.
CLOSED ACCOUNT FEE. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent an annualized fee for shareholder accounts which previously held Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares that were closed during any monthly period at a rate of $0.70, to be paid for twelve months following the date on which an account was closed, whether such account is serviced directly by the Transfer Agent or by a third party pursuant to an omnibus account service, sub-accounting, or networking agreement, as provided in Section 2.04 of the Agreement.
DETERMINING NUMBER OF BILLABLE ACCOUNTS. To the extent a third party servicing accounts through a sub-transfer agency, omnibus account service, sub-accounting, or networking agreement is unable to provide the number of accounts being serviced (a "non-reporting service provider"), the Transfer Agent may estimate the number of open accounts being serviced by the non-reporting service provider by applying the average size of an account being serviced by the Transfer Agent and all third parties who are able to report the number of accounts being serviced (the "reporting service providers") to the total assets invested in a given Portfolio through the accounts maintained by such non-reporting service provider. The Transfer Agent may then estimate the number of closed accounts being serviced by the non-reporting service provider by applying the ratio of closed accounts to open accounts being serviced by the Transfer Agent and all reporting service providers to the estimated number of open accounts being serviced by the non-reporting service provider.
BILLING OF FEES. Both the Open and Closed Account Fees shall be billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the annualized fee for all such accounts.
2. INSTITUTIONAL SHARE CLASSES
ACCOUNTS SERVICED BY THE TRANSFER AGENT. For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of the Institutional Class Shares of each Portfolio to pay the Transfer Agent a fee equal to $2.00 per trade executed, to be billed monthly in arrears.
ACCOUNTS SERVICED BY THIRD PARTIES. The Fund agrees to reimburse the Transfer Agent for fees paid by the Transfer Agent to third parties who service accounts invested in Institutional Class Shares of a Portfolio pursuant to a sub-transfer agency, omnibus account service, sub-accounting, or networking agreements, as provided in Section 2.04 of the Agreement.
CAP ON TRANSFER AGENCY FEES AND EXPENSES. The Transfer Agent agrees to waive the right to collect any fee or reimbursement to which it is entitled hereunder to the extent that collecting such fee or reimbursement would cause the fees and expenses incurred hereunder by the Institutional Class Shares of any given Portfolio to exceed 0.10% of the average net assets attributable to such Class of such Portfolio.
3. INVESTMENT CREDITS
The total fees due to the Transfer Agent from all funds affiliated with the Fund shall be reduced by an amount equal to the investment income earned by the Transfer Agent, if any, on the balances of the disbursement accounts for those funds. Such credits shall first be allocated to the Institutional Class, if any, of a Portfolio based upon the number of accounts holding shares of such Class relative to the total number of accounts holding all Classes of shares in the Portfolio. The Portfolio's remaining fiscal year-to-date credits shall be allocated among accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares, as applicable, on the basis of fiscal year-to-date average net assets.
4. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable out-of-pocket expenses relating to the procurement of the following goods and services, as they relate to the performance of the Transfer Agent's obligations set forth in Article I of the Agreement, including, but not limited to:
o Remote access, license and usage charges paid by the Transfer Agent for use of shareholder record keeping and related systems provided by DST Systems, Inc., and used by the Transfer Agent to service Shareholder accounts, including but not limited to:
o TA2000--Registered Trademark--, the record keeping system on which records related to most Shareholder accounts will be maintained;
o TRAC2000--Registered Trademark--, the record keeping system on which records related to Shareholder accounts held by and through employer-sponsored retirement plans are maintained;
o Automated Work Distributor--Trademark--, a document imaging, storage and distribution system;
o Financial Access Network, a computer system and related software applications which will provide the necessary interfaces to allow customers to access account information residing on the TA2000 and TRAC2000 systems through aiminvestments.com; and
o PowerSelect--Trademark--, a reporting database that AFS can query to produce reports derived from Shareholder account data residing on the TA2000 and TRAC2000 systems.
o Client specific system enhancements.
o Computer terminals, communication lines, printers and other equipment and any expenses incurred in connection with such terminals and lines.
o Magnetic media tapes and related freight.
o Microfiche, microfilm and electronic image scanning equipment, production and storage costs.
o Telephone and telecommunication costs, including all lease, maintenance and line costs.
o Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by third party record keeping vendors.
o Duplicating services.
o Courier services.
o Ad hoc reports.
o Programming costs, system access and usage fees, electronic presentment service fees, data and document delivery fees, and other related fees and costs paid by the Transfer Agent to Fiserv Solutions, Inc., which relate to the printing and delivery of the following documents to Shareholders and to each Shareholder's broker of record:
o Investment confirmations;
o Periodic account statements;
o Tax forms; and
o Redemption checks.
o Printing costs, including, without limitation, the costs associated with printing certificates, envelopes, checks, stationery, confirmations and statements.
o Postage (bulk, pre-sort, ZIP+4, bar coding, first class).
o Shipping, certified and overnight mail and insurance.
o Certificate insurance.
o Banking charges, including without limitation, incoming and outgoing wire charges.
o Check writing fees.
o Federal Reserve charges for check clearance.
o Rendering fees.
o Third party audit reviews.
o Due diligence mailings.
o Shareholder information and education mailings, including, but not limited to, periodic shareholder newsletters and tax guides.
o Such other miscellaneous expenses reasonably incurred by the Transfer Agent in performing its duties and responsibilities.
The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing. In addition, the Fund will promptly reimburse the Transfer Agent for any other unscheduled expenses incurred by the Transfer Agent whenever the Fund and the Transfer Agent mutually agree that such expenses are not otherwise properly borne by the Transfer Agent as part of its duties and obligations under the Agreement.
Out-of-pocket expenses incurred by the Transfer Agent hereunder shall first be allocated among the series portfolios of the AIM Funds and the INVESCO Funds based upon the number of open accounts holding shares in such portfolios. Such out-of-pocket expenses that have been allocated to a Portfolio shall be further allocated to the Institutional Class, if any, of such Portfolio based upon the number of accounts holding shares of such Class relative to the total number of
accounts holding shares of all Classes in the Portfolio. The remaining amount of the Portfolio's fiscal year-to-date out-of-pocket expenses shall be further allocated among accounts holding Class A, A3, B, C, K, R, AIM Cash Reserve and Investor Class Shares and AIM Summit Fund Shares, as applicable, on the basis of fiscal year-to-date average net assets.
5. DEFINITIONS
As used in this Fee Schedule, "AIM Funds" shall mean all investment companies and their series portfolios, if any, comprising, from time to time, the AIM Family of Funds--Registered Trademark--, and "INVESCO Funds" shall mean all investment companies and their series portfolios, if any, whose shares are exchangeable for shares of the same class of the AIM Funds.
AMENDMENT NO. 9
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated September 11, 2000, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Investment Funds, a Delaware statutory 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 INVESTMENT FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Developing Markets Fund September 1, 2001 AIM Global Health Care Fund September 1, 2001 AIM Libra Fund November 1, 2002 AIM Trimark Endeavor Fund November 3, 2003 AIM Trimark Fund November 3, 2003 AIM Trimark Small Companies Fund November 3, 2003" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: November 24, 2003
A I M ADVISORS, INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
---------------------------- -------------------------------
Assistant Secretary Mark H. Williamson
President
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(SEAL)
AIM INVESTMENT FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
---------------------------- -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
This AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made this 1st day of July, 2004 by and between A I M ADVISORS, INC., a Delaware corporation (the "Administrator") and AIM INVESTMENT FUNDS, a Delaware statutory trust (the "Trust") with respect to the separate series set forth in Appendix A to this Agreement, as the same may be amended from time to time (the "Portfolios").
WITNESSETH:
WHEREAS, the Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust, on behalf of the Portfolios, has retained the Administrator to perform (or arrange for the performance of) accounting, shareholder servicing and other administrative services as well as investment advisory services to the Portfolios, and that the Administrator may receive reasonable compensation or may be reimbursed for its costs in providing such additional services, upon the request of the Board of Trustees and upon a finding by the Board of Trustees that the provision of such services is in the best interest of the Portfolios and their shareholders; and
WHEREAS, the Board of Trustees has found that the provision of such administrative services is in the best interest of the Portfolios and their shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the provision of, any or all of the following services by the Administrator or its affiliates:
(a) the services of a principal financial officer of the Trust (including related office space, facilities and equipment) whose normal duties consist of maintaining the financial accounts and books and records of the Trust and the Portfolios, including the review of daily net asset value calculations and the preparation of tax returns; and the services (including related office space, facilities and equipment) of any of the personnel operating under the direction of such principal financial officer;
(b) supervising the operations of the custodian(s), transfer agent(s) or dividend agent(s) for the Portfolios; or otherwise providing services to shareholders of the Portfolios; and
(c) such other administrative services as may be furnished from time to time by the Administrator to the Trust or the Portfolios at the request of the Trust's Board of Trustees.
2. The services provided hereunder shall at all times be subject to the direction and supervision of the Trust's Board of Trustees.
3. As full compensation for the services performed and the facilities furnished by or at the direction of the Administrator, the Trust, on behalf of the Portfolios, shall pay the Administrator
in accordance with the Fee Schedule as set forth in Appendix A attached hereto. Such amounts shall be paid to the Administrator on a monthly basis.
4. The Administrator shall not be liable for any error of judgment or for any loss suffered by the Trust or the Portfolios in connection with any matter to which this Agreement relates, except a loss resulting from the Administrator's willful misfeasance, bad faith or gross negligence in the performance of its duties or from reckless disregard of its obligations and duties under this Agreement.
5. The Trust and the Administrator each hereby represent and warrant, but only as to themselves, that each has all requisite authority to enter into, execute, deliver and perform its obligations under this Agreement and that this Agreement is legal, valid and binding, and enforceable in accordance with its terms.
6. Nothing in this Agreement shall limit or restrict the rights of any director, officer or employee of the Administrator who may also be a trustee, officer or employee of the Trust to engage in any other business or to devote his time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, nor limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
7. This Agreement shall become effective with respect to a Portfolio on the Effective Date for such Portfolio, as set forth in Appendix A attached hereto. This Agreement shall continue in effect until June 30, 2005, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of "a majority of the outstanding voting securities" of such Portfolio (as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the trustees who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose.
This Agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a) (4) of the 1940 Act).
8. This Agreement may be amended or modified with respect to one or more Portfolios, but only by a written instrument signed by both the Trust and the Administrator.
9. Notice is hereby given that, as provided by applicable law, the obligations of or arising out of this Agreement are not binding upon any of the shareholders of the Trust individually but are binding only upon the assets and property of the Trust and that the shareholders shall be entitled, to the fullest extent permitted by applicable law, to the same limitation on personal liability as stockholders of private corporations for profit.
10. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (a) to the Administrator at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046, Attention: President, with a copy to the General Counsel, or (b) to the Trust at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046, Attention: President, with a copy to the General Counsel.
11. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.
12. This Agreement shall be governed by and construed in accordance with the laws (without reference to conflicts of law provisions) of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
A I M ADVISORS, INC.
Attest: /s/ Lisa A. Moss By: /s/ Mark H. Williamson
-------------------------- -------------------------------
Assistant Secretary Mark H. Williamson
President
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(SEAL)
AIM INVESTMENT FUNDS
Attest: /s/ Lisa A. Moss By: /s/ Robert H. Graham
-------------------------- -------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
APPENDIX A
FEE SCHEDULE TO
AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM INVESTMENT FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM Developing Markets Fund July 1, 2004 AIM Global Health Care Fund July 1, 2004 AIM Libra Fund July 1, 2004 AIM Trimark Endeavor Fund July 1, 2004 AIM Trimark Fund July 1, 2004 AIM Trimark Small Companies Fund July 1, 2004 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ---------- 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
*Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000.
EXPENSE REIMBURSEMENT AGREEMENT
RELATED TO DST TRANSFER AGENT SYSTEM CONVERSION
This Expense Reimbursement Agreement (this "Agreement") is made as of the 30th day of June 2003, by and between A I M Fund Services, Inc. ("AFS"), and each of the mutual funds on behalf of each of their respective portfolios listed on Exhibit A, attached hereto (each, a "Fund").
WHEREAS, AFS currently serves and has, at all relevant times, served as the transfer agent for each of the Funds, pursuant to a Transfer Agency and Service Agreement with each Fund (collectively, the "Transfer Agency Agreements"); and
WHEREAS, pursuant to the Transfer Agency Agreements, AFS has agreed to maintain and does maintain all shareholder account records and information for the Funds, and the Funds have agreed to reimburse AFS for certain costs incurred by AFS in the course of performing such services, including, but not limited to, the cost of obtaining licenses to use and the cost of usage of certain record keeping systems and related support systems owned by DST Systems, Inc., and its affiliates (collectively, "DST"); and
WHEREAS, the Funds were made aware of (i) the costs associated with the movement of shareholder account information and related books and records from systems previously used by AFS to perform such services to the DST-owned systems (the "DST system conversion"), and (ii) the cost savings and other benefits that were expected to be realized over the long term by using the DST-owned systems; and
WHEREAS, the Funds determined that it was in the best interests of their shareholders to facilitate the DST system conversion and the use the DST-owned systems by AFS to provide the services contemplated by the Transfer Agency Agreements; and
WHEREAS, the Boards of Directors/Trustees of the Funds have agreed that each of the Funds would reimburse a pro rata share of the costs of the DST system conversion; and
WHEREAS, AFS provided the Funds with periodic reports regarding the project plan and budget related to the DST system conversion, updating cost projections as the project progressed; and
WHEREAS, the DST system conversion is now complete and the final costs related to the project have been compiled;
THEREFORE, the premises considered, AFS and each of the Funds agree on behalf of the portfolios set forth on Exhibit A, severally and not jointly, as follows:
1. Each Fund agrees to reimburse AFS for a pro rata share of the expenses incurred by AFS in connection with the DST system conversion in an aggregate amount, when allocated to all portfolios of the Funds, not to exceed FOUR MILLION SIX HUNDRED FORTY-NINE THOUSAND THREE HUNDRED THIRTY FOUR AND 57/100 DOLLARS ($4,649,334.57), payable in equal installments over thirty-six (36) months. Each month, each portfolio of each Fund shall pay its pro rata portion of the reimbursement, based on each portfolios' number of open billable shareholder accounts for the preceding month. AFS shall submit an invoice to each Fund on the first business day of each month for the amount due by each portfolio. Unless this Agreement is terminated prior to the payment of an invoice, each invoice shall be due and payable by each portfolio of each Fund within thirty (30) days of receipt.
2. The Funds may terminate this Agreement with respect to any portfolio, without penalty, for cause or for convenience, upon notice to AFS.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
A I M FUND SERVICES, INC. ON BEHALF OF EACH OF THE FUNDS:
By: /s/ TONY D. GREEN /s/ KEVIN M. CAROME
------------------------------ -----------------------------------
Name: Tony D. Green Name: Kevin M. Carome
----------------------------- -----------------------------
Title: President Title: Senior Vice President
---------------------------- ----------------------------
|
EXHIBIT A
SCHEDULE OF FUNDS
The following Funds enter into the Agreement on behalf of each of their respective portfolios:
FUND NAME PORTFOLIO NAME
--------- --------------
AIM Advisor Funds AIM International Core Equity Fund
AIM Real Estate Fund
AIM Equity Funds AIM Aggressive Growth Fund
AIM Basic Value II Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Core Strategies Fund
AIM Dent Demographic Trends Fund
AIM Emerging Growth Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Core Equity Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM U.S. Growth Fund
AIM Weingarten Fund
AIM Floating Rate Fund AIM Floating Rate Fund
AIM Funds Group AIM Balanced Fund
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Utilities Fund
AIM International Emerging Growth Fund
AIM Mid Cap Basic Value Fund
AIM New Technology Fund
AIM Premier Equity Fund
AIM Premier Equity II Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM Worldwide Spectrum Fund
AIM Growth Series AIM Basic Value Fund
AIM Mid Cap Core Equity Fund
AIM Small Cap Growth Fund
AIM International Funds, Inc. AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Growth Fund
|
FUND NAME PORTFOLIO NAME
--------- --------------
AIM Investment Funds AIM Developing Markets Fund
AIM Global Biotech Fund
AIM Global Energy Fund
AIM Global Financial Services Fund
AIM Global Health Care Fund
AIM Global Science and Technology Fund
AIM Strategic Income Fund
AIM Investment Securities Funds AIM High Yield Fund
AIM High Yield Fund II
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Short Term Bond Fund
AIM Total Return Bond Fund
AIM Series Trust AIM Global Trends Fund
AIM Special Opportunities Funds AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM Tax-Exempt Funds AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Free Intermediate Fund
|
CONSENT OF COUNSEL
AIM INVESTMENT FUNDS
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 Statements of Additional Information for (i) the retail classes of AIM Developing Markets Fund, AIM Global Health Care Fund, AIM Libra Fund, AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund and (ii) the institutional classes of AIM Trimark Endeavor Fund, AIM Trimark Fund and AIM Trimark Small Companies Fund which are included in Post-Effective Amendment No. 67 to the Registration Statement under the Securities Act of 1933, as amended (No. 33-19338), and Amendment No. 68 to the Registration Statement under the Investment Company Act of 1940, as amended (No. 811-05426), on Form N-1A of AIM Investment Funds.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
August 30, 2004
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form N-1A for each of our three reports each dated December 16, 2003, relating to the financial statements and financial highlights of AIM Developing Markets Fund, AIM Global Health Care Fund and AIM Libra Fund (three of the six funds constituting AIM Investment Funds), which appear in such Registration Statement. We also consent to the references to us under the heading "Other Service Providers" in such Registration Statement.
PricewaterhouseCoopers LLP
Houston, Texas
August 31, 2004
AMENDMENT NO. 6
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class A Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class A Shares of each Portfolio to the average daily net assets of the Class A Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class A Shares of the Portfolio.
MINIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.10% 0.25% 0.35%
INVESCO Total Return Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Multi-Sector Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Basic Value II Fund 0.10% 0.25% 0.35%
AIM Blue Chip Fund 0.10% 0.25% 0.35%
AIM Capital Development Fund 0.10% 0.25% 0.35%
AIM Charter Fund 0.05% 0.25% 0.30%
AIM Constellation Fund 0.05% 0.25% 0.30%
AIM Core Strategies Fund 0.10% 0.25% 0.35%
AIM Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Large Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Large Cap Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Growth Fund 0.10% 0.25% 0.35%
AIM U.S. Growth Fund 0.10% 0.25% 0.35%
AIM Weingarten Fund 0.05% 0.25% 0.30%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.00% 0.25% 0.25%
AIM Basic Balanced Fund 0.10% 0.25% 0.35%
AIM European Small Company Fund 0.10% 0.25% 0.35%
AIM Global Value Fund 0.10% 0.25% 0.35%
AIM International Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Premier Equity Fund 0.00% 0.25% 0.25%
AIM Select Equity Fund 0.00% 0.25% 0.25%
AIM Small Cap Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Global Equity Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.10% 0.25% 0.35%
AIM European Growth Fund 0.10% 0.25% 0.35%
AIM Global Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Global Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.05% 0.25% 0.30%
INVESCO International Core Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.25% 0.25% 0.50%
AIM Global Health Care Fund 0.25% 0.25% 0.50%
AIM Libra Fund 0.10% 0.25% 0.35%
AIM Trimark Endeavor Fund 0.10% 0.25% 0.35%
AIM Trimark Fund 0.10% 0.25% 0.35%
AIM Trimark Small Companies Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Real Estate Fund 0.10% 0.25% 0.35%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.10% 0.25% 0.35%
INVESCO Financial Services Fund 0.10% 0.25% 0.35%
INVESCO Gold & Precious Metals Fund 0.10% 0.25% 0.35%
INVESCO Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Leisure Fund 0.10% 0.25% 0.35%
INVESCO Technology Fund 0.10% 0.25% 0.35%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.10% 0.25% 0.35%
AIM Opportunities II Fund 0.10% 0.25% 0.35%
AIM Opportunities III Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.10% 0.25% 0.35%
INVESCO Mid-Cap Growth Fund 0.10% 0.25% 0.35%
INVESCO Small Company Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.00% 0.25% 0.25%
AIM Tax-Exempt Cash Fund 0.00% 0.25% 0.25%"
|
* 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).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: March 31, 2004
AMENDMENT NO. 7
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS A SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class A Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class A Shares of each Portfolio to the average daily net assets of the Class A Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class A Shares of the Portfolio.
MINIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.10% 0.25% 0.35%
INVESCO Total Return Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Multi-Sector Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.00% 0.25% 0.25%
AIM Basic Value II Fund 0.10% 0.25% 0.35%
AIM Blue Chip Fund 0.10% 0.25% 0.35%
AIM Capital Development Fund 0.10% 0.25% 0.35%
AIM Charter Fund 0.05% 0.25% 0.30%
AIM Constellation Fund 0.05% 0.25% 0.30%
AIM Core Strategies Fund 0.10% 0.25% 0.35%
AIM Dent Demographic Trends Fund 0.10% 0.25% 0.35%
AIM Diversified Dividend Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Large Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Large Cap Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Growth Fund 0.10% 0.25% 0.35%
AIM U.S. Growth Fund 0.10% 0.25% 0.35%
AIM Weingarten Fund 0.05% 0.25% 0.30%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.00% 0.25% 0.25%
AIM Basic Balanced Fund 0.10% 0.25% 0.35%
AIM European Small Company Fund 0.10% 0.25% 0.35%
AIM Global Value Fund 0.10% 0.25% 0.35%
AIM International Emerging Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Basic Value Fund 0.10% 0.25% 0.35%
AIM Premier Equity Fund 0.00% 0.25% 0.25%
AIM Select Equity Fund 0.00% 0.25% 0.25%
AIM Small Cap Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.10% 0.25% 0.35%
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Conservative Allocation Fund 0.10% 0.25% 0.35%
AIM Global Equity Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.10% 0.25% 0.35%
AIM Moderate Allocation Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.10% 0.25% 0.35%
AIM European Growth Fund 0.10% 0.25% 0.35%
AIM Global Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Global Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.05% 0.25% 0.30%
INVESCO International Core Equity Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.25% 0.25% 0.50%
AIM Global Health Care Fund 0.25% 0.25% 0.50%
AIM Libra Fund 0.10% 0.25% 0.35%
AIM Trimark Endeavor Fund 0.10% 0.25% 0.35%
AIM Trimark Fund 0.10% 0.25% 0.35%
AIM Trimark Small Companies Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Limited Maturity Treasury Fund 0.00% 0.15% 0.15%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Real Estate Fund 0.10% 0.25% 0.35%
AIM Short Term Bond Fund 0.10% 0.25% 0.35%
AIM Total Return Bond Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.10% 0.25% 0.35%
INVESCO Financial Services Fund 0.10% 0.25% 0.35%
INVESCO Gold & Precious Metals Fund 0.10% 0.25% 0.35%
INVESCO Health Sciences Fund 0.10% 0.25% 0.35%
INVESCO Leisure Fund 0.10% 0.25% 0.35%
INVESCO Technology Fund 0.10% 0.25% 0.35%
INVESCO Utilities Fund 0.00% 0.25% 0.25%
|
MINIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.10% 0.25% 0.35%
AIM Opportunities II Fund 0.10% 0.25% 0.35%
AIM Opportunities III Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.10% 0.25% 0.35%
INVESCO Mid-Cap Growth Fund 0.10% 0.25% 0.35%
INVESCO Small Company Growth Fund 0.10% 0.25% 0.35%
|
MINIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS A SHARES CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.00% 0.25% 0.25%
AIM Tax-Exempt Cash Fund 0.00% 0.25% 0.25%"
|
* 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).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
AMENDMENT NO. 6
TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
1. Schedule A to the Plan is hereby deleted and replaced in its entirety with Schedule A attached hereto.
All other terms and provisions of the Plan not amended hereby shall remain in full force and effect.
Dated: March 31, 2004
SCHEDULE A
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
DISTRIBUTION AND SERVICE FEES
The Fund shall pay the Distributor or the Assignee as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class B Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below to the average daily net assets of the Class B Shares of the Portfolio. Average daily net assets shall be computed in a manner used for the determination of the offering price of Class B Shares of the Portfolio.
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Global Equity 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
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
|
MAXIMUM
AIM COMBINATION STOCK & ASSET
BOND FUNDS BASED MAXIMUM MAXIMUM
----------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
AMENDMENT NO. 7
TO
AMENDED AND RESTATED MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
1. Schedule A to the Plan is hereby deleted and replaced in its entirety with Schedule A attached hereto.
All other terms and provisions of the Plan not amended hereby shall remain in full force and effect.
SCHEDULE A
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS B SHARES)
DISTRIBUTION AND SERVICE FEES
The Fund shall pay the Distributor or the Assignee as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class B Shares of each Portfolio designated below, a Distribution Fee and a Service Fee determined by applying the annual rate set forth below to the average daily net assets of the Class B Shares of the Portfolio. Average daily net assets shall be computed in a manner used for the determination of the offering price of Class B Shares of the Portfolio.
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.75% 0.25% 1.00%
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Moderate Allocation Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
AIM Global Trends Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIOS CHARGE FEE FEE
------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
AIM High Income Municipal Fund 0.75% 0.25% 1.00%
|
AIM COMBINATION STOCK & MAXIMUM
BOND FUNDS BASED MAXIMUM MAXIMUM
----------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Advantage Health
Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO CHARGE FEE FEE
------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
AMENDMENT NO. 6
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective March 31, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class C Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class C Shares of each Portfolio to the average daily net assets of the Class C Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class C Shares of the Portfolio.
MAXIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Global Equity 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%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
------- ------- --------
AIM High Income Municipal 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).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: March 31, 2004
AMENDMENT NO. 7
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS C SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class C Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class C Shares of each Portfolio to the average daily net assets of the Class C Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class C Shares of the Portfolio.
MAXIMUM
ASSET
AIM COMBINATION STOCK & BOND FUNDS BASED MAXIMUM MAXIMUM
---------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Core Equity Fund 0.75% 0.25% 1.00%
INVESCO Total Return Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM COUNSELOR SERIES TRUST BASED MAXIMUM MAXIMUM
-------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Advantage Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Multi-Sector Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Basic Value II Fund 0.75% 0.25% 1.00%
AIM Blue Chip Fund 0.75% 0.25% 1.00%
AIM Capital Development Fund 0.75% 0.25% 1.00%
AIM Charter Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Constellation Fund 0.75% 0.25% 1.00%
AIM Core Strategies Fund 0.75% 0.25% 1.00%
AIM Dent Demographic Trends Fund 0.75% 0.25% 1.00%
AIM Diversified Dividend Fund 0.75% 0.25% 1.00%
AIM Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Large Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Large Cap Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM U.S. Growth Fund 0.75% 0.25% 1.00%
AIM Weingarten Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Basic Balanced Fund 0.75% 0.25% 1.00%
AIM European Small Company Fund 0.75% 0.25% 1.00%
AIM Global Value Fund 0.75% 0.25% 1.00%
AIM International Emerging Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Basic Value Fund 0.75% 0.25% 1.00%
AIM Premier Equity Fund 0.75% 0.25% 1.00%
AIM Select Equity Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
----------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Aggressive Allocation Fund 0.75% 0.25% 1.00%
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Conservative Allocation Fund 0.75% 0.25% 1.00%
AIM Global Equity Fund 0.75% 0.25% 1.00%
AIM Mid Cap Core Equity Fund 0.75% 0.25% 1.00%
AIM Moderate Allocation Fund 0.75% 0.25% 1.00%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
------------------------------ SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Asia Pacific Growth Fund 0.75% 0.25% 1.00%
AIM European Growth Fund 0.75% 0.25% 1.00%
AIM Global Aggressive Growth Fund 0.75% 0.25% 1.00%
AIM Global Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
INVESCO International Core Equity Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Libra Fund 0.75% 0.25% 1.00%
AIM Trimark Endeavor Fund 0.75% 0.25% 1.00%
AIM Trimark Fund 0.75% 0.25% 1.00%
AIM Trimark Small Companies Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Real Estate Fund 0.75% 0.25% 1.00%
AIM Short Term Bond Fund 0.75% 0.25% 1.00%
AIM Total Return Bond Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SECTOR FUNDS BASED MAXIMUM MAXIMUM
---------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Energy Fund 0.75% 0.25% 1.00%
INVESCO Financial Services Fund 0.75% 0.25% 1.00%
INVESCO Gold & Precious Metals Fund 0.75% 0.25% 1.00%
INVESCO Health Sciences Fund 0.75% 0.25% 1.00%
INVESCO Leisure Fund 0.75% 0.25% 1.00%
INVESCO Technology Fund 0.75% 0.25% 1.00%
INVESCO Utilities Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM SPECIAL OPPORTUNITIES FUNDS BASED MAXIMUM MAXIMUM
------------------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM Opportunities I Fund 0.75% 0.25% 1.00%
AIM Opportunities II Fund 0.75% 0.25% 1.00%
AIM Opportunities III Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM STOCK FUNDS BASED MAXIMUM MAXIMUM
--------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
INVESCO Dynamics Fund 0.75% 0.25% 1.00%
INVESCO Mid-Cap Growth Fund 0.75% 0.25% 1.00%
INVESCO Small Company Growth Fund 0.75% 0.25% 1.00%
|
MAXIMUM
ASSET
AIM TAX-EXEMPT FUNDS BASED MAXIMUM MAXIMUM
-------------------- SALES SERVICE AGGREGATE
PORTFOLIO - CLASS C SHARES CHARGE FEE FEE
-------- ------- ---------
AIM High Income Municipal 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).
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
AMENDMENT NO. 4
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS R SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), dated as of August 18, 2003, pursuant to Rule 12b-1, is hereby amended, effective April 30, 2004, as follows:
Schedule A to the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(CLASS R SHARES)
(DISTRIBUTION AND SERVICE FEES)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for the Class R Shares of each Portfolio designated below, a Distribution Fee* and a Service Fee determined by applying the annual rate set forth below as to the Class R Shares of each Portfolio to the average daily net assets of the Class R Shares of the Portfolio for the plan year. Average daily net assets shall be computed in a manner used for the determination of the offering price of the Class R Shares of the Portfolio.
MINIMUM
ASSET
AIM EQUITY FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Growth Fund 0.25% 0.25% 0.50%
AIM Blue Chip Fund 0.25% 0.25% 0.50%
AIM Capital Development Fund 0.25% 0.25% 0.50%
AIM Charter Fund 0.25% 0.25% 0.50%
AIM Constellation Fund 0.25% 0.25% 0.50%
AIM Large Cap Basic Value Fund 0.25% 0.25% 0.50%
AIM Large Cap Growth Fund 0.25% 0.25% 0.50%
AIM Mid Cap Growth Fund 0.25% 0.25% 0.50%
AIM Weingarten Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM FUNDS GROUP BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Balanced Fund 0.25% 0.25% 0.50%
AIM Basic Balanced Fund 0.25% 0.25% 0.50%
AIM Mid Cap Basic Value Fund 0.25% 0.25% 0.50%
AIM Premier Equity Fund 0.25% 0.25% 0.50%
AIM Small Cap Equity Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM GROWTH SERIES BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Aggressive Allocation Fund 0.25% 0.25% 0.50%
AIM Basic Value Fund 0.25% 0.25% 0.50%
AIM Conservative Allocation Fund 0.25% 0.25% 0.50%
AIM Mid Cap Core Equity Fund 0.25% 0.25% 0.50%
AIM Moderate Allocation Fund 0.25% 0.25% 0.50%
AIM Small Cap Growth Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INTERNATIONAL MUTUAL FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM European Growth Fund 0.25% 0.25% 0.50%
AIM International Growth Fund 0.25% 0.25% 0.50%
INVESCO International Core Equity Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INVESTMENT FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Trimark Endeavor Fund 0.25% 0.25% 0.50%
AIM Trimark Fund 0.25% 0.25% 0.50%
AIM Trimark Small Companies Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM INVESTMENT SECURITIES FUNDS BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
AIM Income Fund 0.25% 0.25% 0.50%
AIM Intermediate Government Fund 0.25% 0.25% 0.50%
AIM Money Market Fund 0.25% 0.25% 0.50%
AIM Real Estate Fund 0.25% 0.25% 0.50%
AIM Short Term Bond Fund 0.25% 0.25% 0.50%
AIM Total Return Bond Fund 0.25% 0.25% 0.50%
|
MINIMUM
ASSET
AIM TREASURER'S SERIES TRUST BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
PORTFOLIO - CLASS R SHARES CHARGE FEE FEE
------- ------- ---------
INVESCO Stable Value Fund 0.25% 0.25% 0.50%
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 30, 2004
FIFTH 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 K Shares - shall mean those Shares designated as Class K Shares in the Fund's organizing documents.
(k) Class R Shares - shall mean those Shares designated as Class R Shares in the Fund's organizing documents.
(l) Distribution Expenses - expenses incurred in activities which are primarily intended to result in the distribution and sale of Shares as authorized 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 those Shares designated as Institutional Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by A I M Distributors, Inc. that are offered for sale to institutional customers as may be approved by the Trustees from time to time and as set forth in the Prospectus.
(q) Institutional Money Market Fund Shares - shall mean those Shares designated as Cash Management Class Shares, Institutional Class Shares, Personal Investment Class Shares, Private Investment Class Shares, Reserve Class Shares, Resource Class Shares and Sweep Class Shares in the Fund's organizing documents and representing an interest in a Portfolio distributed by Fund Management Company that are offered for sale to institutional customers as may be approved by the Trustees from time to time and as set forth in the Prospectus.
(r) Investor Class Shares - shall mean those Shares designated as Investor Class Shares in the Fund's organizing documents.
(s) 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.
(t) Portfolio - a series of the Shares of a Fund constituting a separate investment portfolio of the Fund.
(u) Prospectus - the then currently effective prospectus and statement of additional information of a Portfolio.
(v) 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.
(w) Share - a share of common stock or beneficial interest in a Fund, as applicable.
(x) Trustees - the directors or trustees of a Fund.
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
- Institutional Class Shares - The Institutional Class Shares
shall bear directly the transfer agency
fees and expenses and other shareholder recordkeeping fees and expenses incurred with respect to such Class.
(c) Transfer Agency and Shareholder Recordkeeping Fees - All Shares except Institutional Class Shares - Each Class of Shares, except Institutional Class Shares, shall bear proportionately the transfer agency fees and expenses and other shareholder recordkeeping fees and expenses incurred with respect to such Classes, based on the relative net assets attributable to each such Class.
(d) 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.
(e) 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.
(f) Waiver of Fees and Reimbursement of Expenses - A Portfolio's adviser, underwriter or any other provider of services to the Portfolio may waive fees payable by, or reimburse expenses of, a Class, to the extent that such fees and expenses are payable, or have been paid, to such provider, and have been allocated solely to that Class as a Class expense. Such provider may also waive fees payable, or reimburse expenses paid, by all Classes in a Portfolio to the extent such fees and expenses have been allocated to such Classes in accordance with relative net assets.
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 Prospectus describing the distribution and servicing arrangements are incorporated herein by this reference.
(a) 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 Trustees and set forth in the Prospectus.
(b) 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 Trustees and set forth in the 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 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 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 Trustees and set forth in the Prospectus.
(c) 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 Trustees and set forth in the Prospectus.
(d) 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(c), (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the 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 Prospectus.
Class B Shares of AIM Global Trends Fund 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 Prospectus.
Class B Shares of AIM Money Market Fund will convert to AIM Cash Reserve Shares of AIM Money Market Fund.
(e) 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(d), and (iii) subject to ongoing Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(f) Class K Shares. Class K Shares shall be (i) offered at net asset value, (ii) subject to a CDSC for the CDSC Period set forth in Section 5(e), and (iii) subject to on-going Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(g) 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(f), and (iii) subject to on-going Service Fees and/or Distribution Fees approved from time to time by the Trustees and set forth in the Prospectus.
(h) Institutional Class Shares. Institutional Class Shares shall be (i) offered at net asset value and (ii) offered only to certain categories of institutional customers as approved from time to time by the Trustees and as set forth in the Prospectus.
(i) Institutional Money Market Fund Shares. Institutional Money
Market Fund 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 Trustees and as
set forth in the Prospectus, and (iii) may be subject to
ongoing Service Fees and/or Distribution Fees as approved from
time to time by the Trustees and set forth in the Prospectus.
(j) Investor Class Shares. Investor Class Shares shall be (i) offered at net asset value, (ii) offered only to certain categories of customers as approved from time
to time by the Trustees and as set forth in the Prospectus, and (iii) may be subject to ongoing Service Fees and/or Distribution Fees as approved from time to time by the Trustees and set forth in the Prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not incur a front-end sales charge, and of certain AIM Cash Reserve Shares, Class B Shares, Class C Shares and Class R Shares as follows:
(a) AIM Cash Reserve Shares. 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 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 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 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 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 Prospectus, the relevant portions of which are incorporated herein by reference.
(e) Class K Shares. The CDSC Period for the Class K Shares that are subject to a CDSC shall be the period set forth in the Prospectus. The CDSC rate for the Class K Shares that are subject to a CDSC shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by reference.
(f) 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 Prospectus. The CDSC rate for the Class R Shares that are subject to a CDSC shall be as set forth in the Prospectus, the relevant portions of which are incorporated herein by reference.
(g) 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.
(h) Waiver. The Distributor may in its discretion waive a CDSC otherwise due upon the redemption of Shares on terms disclosed in the Prospectus and, for the
Class A Shares and AIM Cash Reserve Shares, as allowed under Rule 6c-10 under the Act.
(i) 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 Prospectus.
6. Exchange Privileges. Exchanges of Shares, except for Institutional Money Market Fund Shares, shall be permitted between Funds as follows:
(a) Shares of a Portfolio generally may be exchanged for Shares of the same Class of another Portfolio or where so provided for in the Prospectus, another registered investment company distributed by A I M Distributors, Inc. subject to such exceptions and such terms and limitations as are disclosed in the Prospectus.
(b) Shares of a Portfolio generally may not be exchanged for Shares of a different Class of that Portfolio or another Portfolio or another registered investment company distributed by A I M Distributors, Inc. subject to such exceptions and such terms and limitations as are disclosed in the 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 Prospectus.
7. Service Fees and Distribution Fees. The Service Fee and Distribution Fee applicable to any Class shall be those set forth in the 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 Trustees 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 Trustees of a Fund, including a majority of the Trustees 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, as amended and restated October 31, 2002 as further amended and restated effective July 21, 2003 and as further amended and restated effective August 18, 2003, and as further amended and restated May 12, 2004.