As filed with the Securities and Exchange Commission on November 1, 2005
1933 Act Registration No. 2-57526
1940 Act Registration No. 811-2699
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 62 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 58
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(Check appropriate box or boxes.)
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Robert H. Graham
11 Greenway Plaza, Suite 100, Houston, TX 77046
(Name and Address of Agent for Service)
Copy to:
P. Michelle Grace, Esq. Martha J. Hays, Esq. A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll LLP 11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599 |
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 SMALL CAP GROWTH FUND
PROSPECTUS
DECEMBER 14, 2005
AIM Small Cap Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information about the Class A, B, C, R and Investor Class shares of the fund. Please read it before investing and keep it for future reference.
As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
As of the end of business on March 18, 2002, the fund has limited public sales of its shares to certain investors.
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fee Table 4 Expense Example 4 Hypothetical Investment and Expense Information 5 DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 7 ------------------------------------------------------ Sales Charges 7 Dividends and Distributions 7 Limited Fund Offering 7 FINANCIAL HIGHLIGHTS 9 ------------------------------------------------------ SHAREHOLDER INFORMATION A-1 ------------------------------------------------------ Choosing a Share Class A-1 Excessive Short-Term Trading Activity Disclosures A-5 Purchasing Shares A-7 Redeeming Shares A-9 Exchanging Shares A-11 Pricing of Shares A-14 Taxes A-15 OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE, 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 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 by investing, normally, at least 80% of its assets in securities of small-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investment may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization.
The fund may also invest up to 20% of its assets in equity securities of issuers that have market capitalizations, at the time of purchase, in other market capitalization ranges, and in investment-grade non-convertible debt securities, U.S. government securities and high-quality money market instruments. The fund may also invest up to 25% of its total assets in foreign securities. For cash management purposes, the fund may also hold a portion of its assets in cash or cash equivalents, including shares of affiliated money market funds. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting investments, the portfolio managers seek to identify those companies that have strong earnings momentum or demonstrate other potential for growth of capital. The portfolio managers anticipate that the fund, when fully invested, will generally be comprised of companies that are currently experiencing a greater than anticipated increase in earnings. The portfolio managers allocate investments among fixed-income securities based on their views as to the best values then available in the marketplace. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
In anticipation of or in response to adverse market or other conditions or atypical circumstances such as unusually large cash inflows or redemptions, the fund may temporarily hold all or a portion of its assets in cash, cash equivalents or high-quality debt instruments. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. This is especially true with respect to equity securities of smaller companies, whose prices may go up and down more than equity securities of larger, more- established companies. Also, since equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the portfolio to sell securities at a desirable price.
Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, the relative lack of information about these companies, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart and table shown below provide an indication of the risks of investing in the fund. The fund's past performance (before and after taxes) is not necessarily an indication of its future performance.
The following bar chart shows changes in the performance of the fund's Class A shares from year to year. The bar chart does not reflect sales loads. If it did, the annual total returns shown would be lower.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1996................................................................... 13.81%
1997................................................................... 16.22%
1998................................................................... 23.15%
1999................................................................... 90.64%
2000................................................................... -0.74%
2001................................................................... -13.79%
2002................................................................... -28.01%
2003................................................................... 39.12%
2004................................................................... 6.81%
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The Class A shares' year-to-date total return as of September 30, 2005 was %.
During the periods shown in the bar chart, the highest quarterly return was 38.10% (quarter ended December 31, 1999) and the lowest quarterly return was -24.41% (quarter ended September 30, 2001).
(1) The fund's return during certain periods was positively impacted by its investments in Initial Public Offerings (IPOs). There can be no assurance that the fund will have favorable IPO investment opportunities in the future. For additional information regarding the fund's performance, please see the "Financial Highlights" section of this prospectus.
PERFORMANCE TABLE(1)
The following performance table compares the fund's performance to that of a broad-based securities market index, a style specific index and a peer group index. The fund's performance reflects payment of sales loads, if applicable. The indices may not reflect payments of fees, expenses or taxes. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below.
AVERAGE ANNUAL TOTAL RETURNS
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(for the periods ended 5 SINCE INCEPTION
December 31, 2004) 1 YEAR YEARS INCEPTION DATE
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Class A 10/18/95
Return Before Taxes 0.92% (2.85)% 11.72%
Return After Taxes
on Distributions 0.92 (3.21) 10.84
Return After Taxes
on Distributions
and Sale of Fund
Shares 0.60 (2.58) 9.86
Class B 10/18/95
Return Before Taxes 1.05 (2.85) 11.72
Class C 05/03/99
Return Before Taxes 5.05 (2.48) 6.91
Class R(2) 10/18/95(2)
Return Before Taxes 6.52 (1.95) 12.21
Investor Class(3) -- -- -- --
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S&P 500(4) 10.87 (2.30) 10.11 10/31/95(7)
Russell
2000--Registered
Trademark-- Growth
Index(5) 14.31 (3.57) 5.40 10/31/95(7)
Lipper Small-Cap
Growth Fund Index(6) 10.79 (1.51) 8.35 10/31/95(7)
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After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns are shown for Class A shares only and after-tax returns for Class B, C and R shares will vary.
(1) The fund's return during certain periods was positively impacted by its
investments in IPOs. There can be no assurance that the fund will have
favorable IPO investment opportunities in the future. For additional
information regarding the fund's performance, please see the "Financial
Highlights" section of this prospectus.
(2) The return shown for the one year period is the historical performance of
the fund's Class R shares. The returns shown for other periods and since
inception are the blended returns of the historical performance of the
fund's Class R shares since their inception and the restated historical
performance of the fund's Class A shares (for periods prior to inception of
the Class R shares) at net asset value, adjusted to reflect the higher Rule
12b-1 fees applicable to the Class R shares. The inception date shown in the
table is that of the fund's Class A shares. The inception date of the fund's
Class R shares is June 3, 2002.
(3) The expected inception date of the fund's Investor Class shares is December 14, 2005.
(4) The Standard & Poor's 500 Index measures the performance of the 500 most
widely held common stock and is considered one of the best indicators of
U.S. stock market performance. The fund has also included the Russell
2000--Registered Trademark-- Growth Index, which the fund believes more
closely reflects the performance of the securities in which the fund
invests. In addition, the Lipper Small-Cap Growth Fund Index (which may or
may not include the fund) is included for comparison to a peer group.
(5) The Russell 2000--Registered Trademark-- Growth Index measures the
performance of those Russell 2000--Registered Trademark-- Index companies
with higher price-to-book ratios and higher forecasted growth values.
(6) The Lipper Small-Cap Growth Fund Index is an equally weighted representation
of the 30 largest funds in the Lipper Small Cap Growth Classification. These
funds, by portfolio practice, invest at least 75% of their equity assets in
companies with market capitalizations (on a three-year weighted basis) less
than 250% of the dollar-weighted median market capitalization of the
smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500
Index. Small-Cap Growth funds typically have an above-average
price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share
growth value, compared to the S&P SmallCap 600 Index.
(7) The average annual total return given is since the month end closest to the
inception date of the classes with the longest performance history.
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES --------------------------------------------------------------------------------------- (fees paid directly from CLASS CLASS CLASS CLASS INVESTOR your investment) A B C R CLASS --------------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None 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) None --------------------------------------------------------------------------------------- |
ANNUAL FUND OPERATING EXPENSES(4) -------------------------------------------------------------------------------------- (expenses that are deducted CLASS CLASS CLASS CLASS INVESTOR from fund assets) A B C R CLASS -------------------------------------------------------------------------------------- Management Fees 0.69% 0.69% 0.69% 0.69% 0.69% Distribution and/or Service (12b-1) Fees(5) 0.25 1.00 1.00 0.50 0.25 Other Expenses(6,7) 0.34 0.34 0.34 0.34 0.34 Total Annual Fund Operating Expenses(8) 1.28 2.03 2.03 1.53 1.28 -------------------------------------------------------------------------------------- |
(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 bought $1,000,000 or more
of Class A shares, you may pay a 1.00% CDSC if a total redemption of the
retirement plan assets occurs within 12 months from the date of the
retirement plan's initial purchase.
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the
distributor paid a concession to the dealer of record and a total
redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.
(4) There is no guarantee that actual expenses will be the same as those shown
in the table.
(5) The Board of Trustees has approved a permanent reduction of the Rule 12b-1
fees applicable to Class A shares to 0.25% effective July 1, 2005.
Distribution and/or Service (12b-1) Fees reflect this agreement.
(6) Effective October 1, 2005, the Board of Trustees approved an amendment to
the transfer agency agreement. Other Expenses have been restated to reflect
the changes in fees under the new agreement.
(7) Other expenses are based on estimated average assets for the current fiscal year.
(8) At the request of the Board of Trustees, AMVESCAP (as defined herein) has agreed to reimburse the fund for expenses related to market timing matters. Net Annual Fund Operating Expenses restated for the items in Note 5 and Note 6 and net of this arrangement were 1.27%, 2.02%, 2.02% and 1.52% on Class A, Class B, Class C and Class R shares, respectively, for the year ended December 31, 2004.
If a financial institution is managing your account you may also be charged a transaction or other fee by such financial institution.
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, that the fund's operating expenses remain the same and includes the effect of contractual fee waivers and/or expense reimbursements, if any. To the extent fees are waived or expenses are reimbursed voluntarily, your expenses will be lower. Although your actual returns and costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A $673 $934 $1,214 $2,010
Class B 706 937 1,293 2,166
Class C 306 637 1,093 2,358
Class R 156 483 834 1,824
Investor Class 130 406 702 1,545
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You would pay the following expenses if you did not redeem your shares:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A $673 $934 $1,214 $2,010
Class B 206 637 1,093 2,166
Class C 206 637 1,093 2,358
Class R 156 483 834 1,824
Investor Class 130 406 702 1,545
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HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION
The following supplemental hypothetical investment information provides additional information in a different format from the preceding Fee Table and Expense Example about the effect of a fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. Because a fund's annual return when quoted is already reduced by the fund's fees and expenses for that year, this hypothetical expense information is intended to help you understand the annual and cumulative impact of a fund's fees and expenses on your investment. Assuming a hypothetical investment of $10,000 in each class of shares of the fund and a 5% return before expenses each year, the chart shows the cumulative return before expenses, the cumulative return after expenses, the ending balance and the estimated annual expenses for each year one through ten. The chart also assumes that the current annual expense ratio stays the same throughout the 10-year period. The current annual expense ratio for each class, which is the same as stated in the Fee Table above, is reflected in the chart and is net of any contractual fee waiver or expense reimbursement. There is no assurance that the annual expense ratio will be the expense ratio for the fund class. To the extent that the advisor makes any waivers or reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account initial or contingent deferred sales charges, if any. You should understand that this is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios; your actual returns and expenses are likely to differ (higher or lower) from those shown below.
CLASS A--ANNUAL EXPENSE RATIO 1.28% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% Cumulative Return After Expenses 3.72% 7.58% 11.58% 15.73% 20.04% 24.50% 29.13% 33.94% End of Year Balance $10,372.00 $10,757.84 $11,158.03 $11,573.11 $12,003.53 $12,450.16 $12,913.31 $13,393.68 Estimated Annual Expenses $ 130.28 $ 135.23 $ 140.26 $ 145.48 $ 150.89 $ 156.50 $ 162.33 $ 168.36 ----------------------------------------------------------------------------------------------------------------------------------- CLASS A--ANNUAL EXPENSE RATIO 1.28% YEAR 9 YEAR 10 ------------------------------------------------------ Cumulative Return Before Expenses 55.13% 62.89% Cumulative Return After Expenses 38.92% 44.09% End of Year Balance $13,891.93 $14,408.71 Estimated Annual Expenses $ 174.63 $ 181.12 ------------------------------------------------------ |
CLASS B--ANNUAL EXPENSE RATIO 2.03% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% Cumulative Return After Expenses 2.97% 6.03% 9.18% 12.42% 15.76% 19.20% 22.74% 26.38% End of Year Balance $10,297.00 $10,602.82 $10,917.72 $11,241.98 $11,575.87 $11,919.67 $12,273.69 $12,638.21 Estimated Annual Expenses $ 206.01 $ 212.13 $ 218.43 $ 224.92 $ 231.60 $ 238.48 $ 245.56 $ 252.86 ----------------------------------------------------------------------------------------------------------------------------------- CLASS B--ANNUAL EXPENSE RATIO 2.03% YEAR 9 YEAR 10 ------------------------------------------------------ Cumulative Return Before Expenses 55.13% 62.89% Cumulative Return After Expenses 31.08% 35.96% End of Year Balance $13,108.36 $13,595.99 Estimated Annual Expenses $ 164.78 $ 170.91 ------------------------------------------------------ |
CLASS C--ANNUAL EXPENSE RATIO 2.03% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% Cumulative Return After Expenses 2.97% 6.03% 9.18% 12.42% 15.76% 19.20% 22.74% 26.38% End of Year Balance $10,297.00 $10,602.82 $10,917.72 $11,241.98 $11,575.87 $11,919.67 $12,273.69 $12,638.21 Estimated Annual Expenses $ 206.01 $ 212.13 $ 218.43 $ 224.92 $ 231.60 $ 238.48 $ 245.56 $ 252.86 ----------------------------------------------------------------------------------------------------------------------------------- CLASS C--ANNUAL EXPENSE RATIO 2.03% YEAR 9 YEAR 10 ------------------------------------------------------ Cumulative Return Before Expenses 55.13% 62.89% Cumulative Return After Expenses 30.14% 34.00% End of Year Balance $13,013.57 $13,400.07 Estimated Annual Expenses $ 260.37 $ 268.10 ------------------------------------------------------ |
CLASS R--ANNUAL EXPENSE RATIO 1.53% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% Cumulative Return After Expenses 3.47% 7.06% 10.78% 14.62% 18.60% 22.71% 26.97% 31.38% End of Year Balance $10,347.00 $10,706.04 $11,077.54 $11,461.93 $11,859.66 $12,271.19 $12,697.00 $13,137.59 Estimated Annual Expenses $ 155.65 $ 161.06 $ 166.64 $ 172.43 $ 178.41 $ 184.60 $ 191.01 $ 197.63 ----------------------------------------------------------------------------------------------------------------------------------- CLASS R--ANNUAL EXPENSE RATIO 1.53% YEAR 9 YEAR 10 ------------------------------------------------------ Cumulative Return Before Expenses 55.13% 62.89% Cumulative Return After Expenses 35.93% 40.65% End of Year Balance $13,593.46 $14,065.15 Estimated Annual Expenses $ 204.49 $ 211.59 ------------------------------------------------------ |
INVESTOR CLASS--ANNUAL EXPENSE RATIO 1.28% YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 ----------------------------------------------------------------------------------------------------------------------------------- Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% 34.01% 40.71% 47.75% Cumulative Return After Expenses 3.72% 7.58% 11.58% 15.73% 20.04% 24.50% 29.13% 33.94% End of Year Balance $10,372.00 $10,757.84 $11,158.03 $11,573.11 $12,003.63 $12,450.16 $12,913.31 $13,393.68 Estimated Annual Expenses $ 130.38 $ 135.23 $ 140.26 $ 145.48 $ 150.89 $ 156.50 $ 162.33 $ 168.36 ----------------------------------------------------------------------------------------------------------------------------------- INVESTOR CLASS--ANNUAL EXPENSE RATIO 1.28% YEAR 9 YEAR 10 ------------------------------------------------------ Cumulative Return Before Expenses 55.13% 62.89% Cumulative Return After Expenses 38.92% 44.09% End of Year Balance $13,891.93 $14,408.71 Estimated Annual Expenses $ 174.63 $ 181.12 ------------------------------------------------------ |
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission (SEC) within 60 days of the fund's first and third fiscal quarter-ends. In addition, portfolio holdings information for the fund is available at (http://www.aiminvestments.com). To reach this information, access the fund's overview page on the website. Links to the following fund information are located in the upper right side of this website page:
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APPROXIMATE DATE OF INFORMATION REMAINS
INFORMATION WEBSITE POSTING POSTED ON WEBSITE
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Top ten holdings as of month end 15 days after month end Until posting of the following month's top
ten holdings
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Complete portfolio holdings as of 30 days after calendar quarter end For one year
calendar quarter end
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A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information, which is available at (http://www.aiminvestments.com).
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the investment advisor. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Half of this amount has already been paid to the fair fund pursuant to the terms of the settlement with the remainder due December 31, 2005. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlement. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; (iii) that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans; (iv) 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; (v) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and (vi) that the defendants breached their fiduciary duties by failing to ensure that the funds participated in class action settlements in which they were eligible to participate.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2004, the advisor received compensation of 0.69% of average daily net assets.
A discussion regarding the basis for the board of trustees approving the investment advisory agreement of the fund is available in the fund's semi-annual report to shareholders for the six month period ended June 30, 2005.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Juliet S. Ellis (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, she was Managing Director and from 1993 to 2004, she was a senior portfolio manager with JPMorgan Fleming Asset Management. As the lead manager, Ms. Ellis generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Ms. Ellis may perform these functions, and the nature of these functions, may change from time to time.
- Juan R. Hartsfield, Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, he was a co-portfolio manager with JPMorgan Fleming Asset Management. From 1999 to 2000, he was a management consultant with Booz Allen & Hamilton.
They are assisted by the advisor's Small Cap Core/Growth Team, which may be comprised of portfolio managers, research analysts and other investment professionals of the advisor. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on the portfolio managers and the team, including biographies of other members of the team, may be found on the advisor's website (http://www.aiminvestments.com). The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
SALES CHARGES
Purchases of Class A shares of AIM Small Cap Growth Fund are subject to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" section of this prospectus. Certain purchases of Class A shares at net asset value may be subject to the contingent deferred sales charge listed in that section. Purchases of Class B and Class C shares are subject to the contingent deferred sales charges listed in that section. Certain purchases of Class R shares may be subject to the contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually.
LIMITED FUND OFFERING
Due to the sometimes limited availability of common stocks of smaller companies
that meet the investment criteria for the fund, the fund limited public sales of
its shares to certain investors, effective as of the close of business on March
18, 2002. Investors should note that the fund reserves the right to refuse any
order that might disrupt the efficient management of the fund.
The following types of investors may continue to invest in the fund if they were invested in the fund on March 18, 2002 and remain invested in the fund after that date:
(i) Existing shareholders of the fund;
(ii) Existing shareholders of the fund who open other accounts in their name;
(iii) The following plans and programs:
- Retirement plans maintained pursuant to Section 401 of the Internal Revenue Code ("the Code");
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non qualified deferred compensation plans maintained pursuant to
Section 83 of the Code; and
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code.
Future investments in the fund made by existing brokerage firm wrap programs are at the discretion of A I M Distributors, Inc. (the distributor). Please contact the distributor for approval.
The following types of investors may open new accounts in the fund, if approved by the distributor:
- Retirement plans maintained pursuant to Section 401 of the Code;
- Retirement plans maintained pursuant to Section 403 of the Code, to the extent they are maintained by organizations established under Section 501(c)(3) of the Code;
- Retirement plans maintained pursuant to Section 457 of the Code;
- Non qualified deferred compensation plans maintained pursuant to Section 83 of the Code;
- Qualified Tuition Programs maintained pursuant to Section 529 of the Code; and
- Portfolio management team, including analysts.
Such plans and programs that are considering the fund as an investment option should contact the distributor for approval.
At the advisor's discretion, proprietary asset allocation funds may open new accounts in the fund.
The fund may resume sales of shares to other new investors on a future date if the advisor determines it is appropriate and the Board of Trustees approves.
The financial highlights table is intended to help you understand the fund's financial performance. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report which is available upon request.
For a discussion of how investments in IPOs affected the fund's performance, see the "Performance Information" section of this prospectus.
Investor Class shares commenced operations on the date of this prospectus and, therefore, financial information for such shares is not available.
CLASS A
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- ---------- ---------- -------- -------- --------
(UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.46 $ 25.71 $ 18.47 $ 25.67 $ 29.81 $ 31.87
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.32) (0.21)(a) (0.19)(a) (0.18)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.65 2.07 7.45 (7.01) (3.93) (0.12)
=================================================================================================================================
Total from investment operations 0.51 1.75 7.24 (7.20) (4.11) (0.25)
=================================================================================================================================
Less distributions:
Distributions from net realized gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 27.97 $ 27.46 $ 25.71 $ 18.47 $ 25.67 $ 29.81
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.86% 6.81% 39.20% (28.05)% (13.79)% (0.74)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,317,363 $1,491,940 $1,602,724 $790,700 $679,104 $566,458
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets:
With fee waivers and/or expense
reimbursements 1.49%(c) 1.40% 1.27% 1.35% 1.31% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.59%(c) 1.51% 1.37% 1.43% 1.39% 1.23%
=================================================================================================================================
Ratio of net investment income (loss)
to average net assets (1.04)%(c) (1.12)% (0.98)% (0.91)% (0.70)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 net assets of $1,369,815,685.
(d) Not annualized for periods less than one year.
CLASS B
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- -------- -------- -------- -------- --------
(UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.61 $ 24.15 $ 17.49 $ 24.48 $ 28.64 $ 30.92
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.40)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.59 1.98 7.01 (6.66) (3.78) (0.07)
=================================================================================================================================
Total from investment operations 0.37 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized
gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.98 $ 25.61 $ 24.15 $ 17.49 $ 24.48 $ 28.64
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.44% 6.05% 38.08% (28.55)% (14.42)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $128,150 $149,400 $182,700 $152,577 $212,958 $231,293
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.24%(c) 2.15%(d) 2.02% 2.08% 2.03%(d) 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.79)%(c) (1.87)% (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 $134,388,574.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements for
2004 and 2001 was 2.16% and 2.04%, respectively.
(e) Not annualized for periods less than one year.
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------- ------- ------- ------- ------- -------
(UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.60 $ 24.14 $ 17.48 $ 24.47 $ 28.63 $ 30.91
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.39)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.59 1.98 7.01 (6.66) (3.78) (0.08)
=================================================================================================================================
Total from investment operations 0.37 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.97 $ 25.60 $ 24.14 $ 17.48 $ 24.47 $ 28.63
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.45% 6.05% 38.10% (28.57)% (14.43)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $33,702 $40,904 $50,031 $41,693 $46,833 $41,738
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.24%(c) 2.15%(d) 2.02% 2.08% 2.03%(d) 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.79)%(c) (1.87)% (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 $35,914,542.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements for
2004 and 2001 was 2.16% and 2.04%, respectively.
(e) Not annualized for periods less than one year.
CLASS R
-----------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2005 2004 2003 2002
---------- ------- ------ -------------
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.28 $ 25.61 $18.44 $ 22.64
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.27) (0.28)(a) (0.13)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.94 7.45 (4.07)
=========================================================================================================================
Total from investment operations 0.47 1.67 7.17 (4.20)
=========================================================================================================================
Net asset value, end of period $ 27.75 $ 27.28 $25.61 $ 18.44
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 1.72% 6.52% 38.88% (18.55)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $19,119 $19,506 $9,029 $ 1,301
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 1.74%(c) 1.65%(d) 1.52% 1.61%(e)
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (1.29)%(c) (1.37)% (1.23)% (1.17)%(e)
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate(f) 24% 69% 32% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $18,829,781.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.66%.
(e) Annualized.
(f) Not annualized for periods less than one year.
In addition to the fund, AIM serves as investment advisor to many other mutual funds (the funds). The following information is about all the funds.
CHOOSING A SHARE CLASS
Most of the funds have multiple classes of shares, each class representing an interest in the same portfolio of investments. Certain classes have higher expenses than other classes which may lower the return on your investment relative to a less expensive class. In deciding which class of shares to purchase, you should consider, among other things, (i) the length of time you expect to hold your shares, (ii) the provisions of the distribution plan, if any, applicable to the class (iii) the eligibility requirements that apply to purchases of a particular class, and (iv) any services you may receive in making your investment determination. In addition, you should consider the other factors described below. Please contact your financial advisor to assist you in making your decision.
CLASS A(1) CLASS A3 CLASS B(4) CLASS C CLASS R INVESTOR CLASS
---------------------------------------------------------------------------------------------------------------
- Initial sales - No initial - No initial sales - No initial - No initial - No initial
charge sales charge charge sales charge sales charge sales 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) within six years within one
year(7)
- 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%(3)
service (12b-1)
fee than Class B,
Class C, Class K
or Class R shares
(See "Fee Table
and Expense
Example")(3)
- Does not - Converts to - Does not - Does not - Does not
convert to Class A shares convert to convert to convert to
Class A shares at the end of Class A shares Class A shares Class A shares
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 - Available only - Purchase orders - Generally more - Generally, - Closed to new
appropriate for for a limited limited to appropriate only available investors,
long-term number of amount less than for short-term to employee except as
investors funds $100,000(6) investors benefit described in
- Purchase plans(9) the
orders limited "Purchasing
to amount less Shares -- Grandfathered
than Investors"
$1,000,000(8) section of
your
prospectus
---------------------------------------------------------------------------------------------------------------
|
Certain funds also offer Institutional Class shares to certain eligible institutional investors; consult the fund's Statement of Additional Information for the Institutional Class shares 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) Class A shares of AIM Tax-Free Intermediate Fund and Investor Class shares of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio do not have a 12b-1 fee.
(4) Class B shares are not 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 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) Any purchase order for Class B shares in an amount equal to or in excess of $100,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation.
(7) 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 fund that are subject to a CDSC into AIM Short Term Bond Fund.
MCF--10/05
(8) Any purchase order for Class C shares in an amount equal to or in excess of $1,000,000 will be rejected. Although our ability to monitor or enforce this limitation for underlying shareholders of omnibus accounts is severely limited, we have advised the administrators of omnibus accounts maintained by brokers, retirement plans and approved fee-based programs of this limitation.
DISTRIBUTION AND SERVICE (12b-1) FEES
Each fund (except AIM Tax-Free Intermediate Fund with respect to its Class A shares and AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio with respect to their Investor Class shares) has adopted 12b-1 plans that allow the fund to pay distribution fees to A I M Distributors, Inc. (ADI) 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 fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Sales charges on the 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.
Certain categories of persons are permitted to purchase Class A shares of the funds without paying an initial sales charge because their transactions involve little expense, such as persons who have a relationship with the funds or with AIM and certain programs for purchase. For more detailed information regarding eligibility to purchase or redeem shares at reduced or without sales charges, please consult the fund's website at www.aiminvestments.com and click on the links "My Account", Service Center, or consult the fund's Statement of Additional Information, which is available upon request free of charge.
INITIAL SALES CHARGES
The 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 fund is classified.
INVESTOR'S
SALES CHARGE
---------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION 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
------------------------------------------------------------------------------
|
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 or 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 fund.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of
Category I and II funds 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%.
MCF--10/05
If you currently own Class A shares of a Category I or II fund or AIM Short Term Bond Fund and make additional purchases at net asset value that result in account balances of $1,000,000 or more, the additional shares purchased will be subject to an 18-month, 1% CDSC.
Some retirement plans can purchase Class A shares at their net asset value per share. If ADI 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.
ADI may pay a dealer concession and/or a service fee for Large Purchases and purchases by certain retirement plans.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
YEAR SINCE PURCHASE MADE CLASS B CLASS C -------------------------------------------------------------------------------- First 5% 1% Second 4 None Third 3 None Fourth 3 None Fifth 2 None Sixth 1 None Seventh and following None None -------------------------------------------------------------------------------- |
You can purchase Class C shares of AIM Short Term Bond Fund at their net asset value and not subject to a CDSC. However, you may be charged a CDSC when you redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares through an exchange, and the shares originally purchased were subject to a CDSC.
CONTINGENT DEFERRED SALES CHARGES FOR CLASS R SHARES
You can purchase Class R shares at their net asset value per share. If ADI 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 are redeeming 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 advisor must notify the transfer agent at the time of purchase that your purchase qualifies for such treatment. Certain individuals and employer-sponsored retirement plans may link accounts for the purpose of qualifying for lower initial sales charges. You or your financial consultant must provide other account numbers to be considered for Rights of Accumulation, or mark the Letter of Intent section on the account application, or provide other relevant documentation, so that the transfer agent can verify your eligibility for the reduction or exception. Consult the fund's Statement of Additional Information for details.
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 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 a fund with fund shares
currently owned (Class A, B, C or R) and investments in the AIM College Savings
Plan(SM) 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. The transfer agent may automatically link
certain accounts registered in the same name, with the same taxpayer
identification number, for the purpose of qualifying you for lower initial sales
charge rates.
LETTERS OF INTENT
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of the 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 funds;
- when shares are purchased in connection with the repayment of a retirement plan loan administered by AIM Investment Services, Inc.; or
- when a merger, consolidation, or acquisition of assets of a fund occurs.
MCF--10/05
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 a 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 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 A, C or 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 A, C or Class R shares held through such plan that would otherwise be subject to a CDSC;
- if you are a participant in a qualified retirement plan and redeem Class A, Class C or Class R shares in order to fund a distribution;
- if you participate in the Systematic Redemption Plan and withdraw up to 12% of the value of your shares that are subject to a CDSC in any twelve-month period;
- if you redeem shares to pay account fees;
- for redemptions following the death or post-purchase disability of a shareholder or beneficial owner;
- 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.
ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS
The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI or one or more of its corporate affiliates (collectively, ADI Affiliates) may make additional cash payments to financial advisors in connection with the promotion and sale of shares of the funds. These additional cash payments may include cash revenue sharing payments and other payments for certain administrative services, transaction processing services and certain other marketing support services. ADI Affiliates make these payments from their own resources, from ADI's retention of underwriting concessions and from payments to ADI under Rule 12b-1 plans. In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates.
ADI Affiliates make revenue sharing payments as incentives to certain financial advisors to promote and sell shares of the funds. The benefits ADI Affiliates receive when they make these payments include, among other things, placing the funds on the financial advisor's funds sales system, placing the funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including the funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. The revenue sharing payments ADI Affiliates make may be calculated on sales of shares of the 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 financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM funds attributable to that particular financial advisor (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. Sales-Based Payments primarily create incentives to make new sales of shares of the funds and Asset-Based Payments primarily create incentives to retain previously sold shares of the funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments.
ADI Affiliates also may make other payments to certain financial advisors for processing certain transactions or account maintenance activities (such as processing purchases, redemptions or exchanges or producing customer account statements) or for providing certain other marketing support services (such as financial assistance for conferences, seminars or sales or training programs at which ADI Affiliates personnel may make presentations on the funds to the financial advisor's sales force). Financial advisors may earn profits on these payments for these services, since the amount of the payment may exceed the cost of providing the service. Certain of these payments are subject to limitations under applicable law.
ADI Affiliates are motivated to make the payments described above since they promote the sale of fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of the funds or retain shares of the funds in their clients' accounts, ADI Affiliates benefit from the incremental management and other fees paid to ADI Affiliates by the funds with respect to those assets.
You can find further details in the fund's Statement of Additional Information about these payments and the services provided by financial advisors. In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you
MCF--10/05
additional fees or commissions other than those disclosed in this prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the funds, as well as about fees and/or commissions it charges.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
While the funds provide their shareholders with daily liquidity, their investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. 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, thus interfering with the efficient management of such funds by causing them to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted. The Boards of Trustees have adopted policies and procedures designed to discourage excessive or short-term trading of fund shares for all funds except the money market funds. However, there is the risk that these funds' policies and procedures will prove ineffective in whole or in part to detect or prevent excessive or short-term trading. These funds may alter their policies at any time without prior notice to shareholders if the advisor believes the change would be in the best interests of long-term shareholders.
AIM and its affiliates (collectively, AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the retail funds:
(1) trade activity monitoring;
(2) trading guidelines;
(3) redemption fee on trades in certain funds; and
(4) use of fair value pricing consistent with procedures approved by the Boards of Trustees of the funds.
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 long-term shareholder interests.
The Boards of Trustees of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio (the money market funds) have not adopted any policies and procedures that would limit frequent purchases and redemptions of such funds' shares. The Boards do not believe that it is appropriate to adopt any such policies and procedures for the money market funds for the following reasons:
- The money market funds are offered to investors as cash management vehicles. Investors must perceive an investment in such funds as an alternative to cash, and must be able to purchase and redeem shares regularly and frequently.
- One of the advantages of a money market fund as compared to other investment options is liquidity. Any policy that diminishes the liquidity of the money market funds will be detrimental to the continuing operations of such funds.
- The money market funds' portfolio securities are valued on the basis of amortized cost, and such funds seeks to maintain a constant net asset value. As a result, there are no price arbitrage opportunities.
- Because the money market funds seek to maintain a constant net asset value, investors expect to receive upon redemption the amount they originally invested in such funds. Imposition of redemption fees would run contrary to investor expectations.
The Boards considered the risks of not having a specific policy that limits frequent purchases and redemptions, and it determined that those risks are minimal, especially in light of the reasons for not having such a policy as described above. Nonetheless, to the extent that the fund must maintain additional cash and/or securities with short-term durations than may otherwise be required, the fund's yield could be negatively impacted.
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 will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the shareholder to take action to stop such activities or (ii) refusing to process future purchases or exchanges related to such activities in the shareholder's accounts other than exchanges into a money market fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the practical limitations described above.
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 or non-existent 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, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per calendar year, or a
MCF--10/05
fund or an AIM Affiliate 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 AIM Affiliates reserve the discretion to accept exchanges in excess of these guidelines on a case-by-case basis if they believe that granting such exceptions would be consistent with the best interests of shareholders. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. The movement out of one fund (redemption) and into one or more other funds (purchase) on the same day shall be counted as one exchange. Exchanges effected as part of programs that have been determined by an AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio rebalancing, or other automatic non-discretionary programs that involve exchanges, generally will not be counted toward the trading guidelines limitation of four exchanges out of a fund per calendar year.
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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to implement these trading guidelines and may be further limited by systems limitations applicable to those types of accounts.
Some investments in the funds are made indirectly through vehicles such as qualified tuition plans, variable annuity and insurance contracts, and funds of funds which use the funds as underlying investments (each a conduit investment vehicle). If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to impose exchange limitations on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle.
REDEMPTION FEE
You may be charged a 2% redemption fee if you redeem, including redeeming by exchange, shares of certain funds within 30 days of purchase. 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 or non-existent in those instances in which the broker, retirement plan administrator or fee-based program sponsor maintains the underlying shareholder accounts and is unwilling or unable to assess such fees and may be further limited by systems limitations applicable to these types of accounts.
For additional discussion of the applicability of redemption fees on shares of the fund held through omnibus accounts, retirement plan accounts, approved fee-based program accounts and conduit investment vehicles, see "Redeeming Shares -- Redemption Fee".
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares -- Determination of Net Asset Value" for more information.
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PURCHASING SHARES
If you hold your shares through a broker/dealer or other financial institution, your eligibility to purchase those shares, the conditions for purchase and sale, and the minimum and maximum amounts allowed may differ depending on that institution's policies.
MINIMUM INVESTMENTS PER FUND ACCOUNT
There are no minimum investments with respect to Class R shares for fund accounts. The minimum investments with respect to Class A, A3, B and C shares and Investor Class shares for fund accounts are as follows:
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
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Employer-Sponsored Retirement Plans (includes section 401, $ 0 ($25 per fund investment for $25
403 and salary deferrals from
457 plans, and SEP, SARSEP and SIMPLE IRA plans) Employer-Sponsored Retirement
Plans)
Systematic Purchase Plan 50 50
IRA, Roth IRA or Coverdell ESA 250 25
All other accounts 1,000 50
ADI has the discretion to accept orders for lesser amounts.
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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 fund verify and record your identifying information.
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
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Through a Financial Advisor Contact your financial advisor. 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 #:
021000021
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 retirement accounts on the
internet.
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MCF--10/05
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 ADI (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 ADI 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) fund trustees, 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 funds by authorizing the
transfer agent 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 fund account to one or more other 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 day of the month you specify, in the
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through
the 31st of the month. The minimum amount you can exchange to another fund is
$50. You may participate in a dollar cost averaging program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Dollar Cost Averaging program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same fund. You may invest
your dividends and distributions per the rules listed in the "Permitted
Exchanges" section.
You must comply with the following requirements to be eligible to invest your dividends and distributions in shares of another fund:
(1) Your account balance (a) in the fund paying the dividend must be at least $5,000; and (b) in the fund receiving the dividend must be at least $500; and
(2) Both accounts must have identical registration information.
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 fund holdings should be rebalanced, on a percentage basis,
between two and ten of your funds on a quarterly, semiannual or annual basis.
Your portfolio will be rebalanced through the exchange of shares in one or more
of your funds for shares of the same class of one or more other funds in your
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your
stated allocation. 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. You may participate in a portfolio rebalancing program hosted by your
dealer of record, your financial advisor or another financial intermediary. If
such program is the same or similar to AIM's Portfolio Rebalancing Program and
is non-discretionary, both as determined by an AIM Affiliate, exchanges made
pursuant to such program generally will not be counted toward the trading
guideline limitation of four exchanges out of a fund per calendar year.
RETIREMENT PLANS
Shares of most of the 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 ADI sponsored retirement plans, which include IRAs,
Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.
AIM Investment Services, Inc. assesses certain fees associated with the
maintenance of certain types of retirement plan accounts and the provision of
specialized recordkeeping services for those plan accounts. ADI assesses certain
fees associated with the maintenance of retirement plan documents for which it
acts as the prototype sponsor. Contact your financial advisor for details.
MCF--10/05
REDEEMING SHARES
REDEMPTION FEE
You may be charged a 2% redemption fee (on redemption proceeds) if you redeem, including redeeming by exchange, shares of the following funds 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 Core Equity Fund AIM European Small Company AIM International Growth Fund Fund AIM International Small Company Fund AIM Global Aggressive Growth AIM S&P 500 Index Fund Fund AIM Trimark Fund AIM Global Equity Fund AIM Global Growth Fund AIM Global Real Estate 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 generally 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 by funds of funds, qualified tuition plans maintained pursuant to Section 529 of the Code, and insurance company separate accounts which use the funds as underlying investments;
(5) total or partial redemptions effectuated pursuant to an automatic non-discretionary rebalancing program or a systematic withdrawal plan established with the funds or a financial intermediary;
(6) 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;
(7) total or partial redemption of shares acquired through investment of dividends and other distributions; or
(8) redemptions initiated by a fund.
The AIM Affiliates' goals are to apply the redemption fee on all classes of shares of the above funds 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. 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 (1) through (8) above may impose a redemption fee that has different characteristics, which may be more or less restrictive, than those set forth above.
Some investments in the funds are made indirectly through conduit investment vehicles. If shares of the funds are held in the name of a conduit investment vehicle and not in the names of the individual investors who have invested in the funds through the conduit investment vehicle, the conduit investment vehicle may be considered an individual shareholder of the funds. To the extent that a conduit investment vehicle is considered an individual shareholder of the funds, the funds are likely to be limited in their ability to assess redemption fees on individual transactions initiated by investors who have invested in the funds through the conduit investment vehicle. In these cases, the applicability of redemption fees will be determined based on the aggregate holdings and redemptions of the conduit investment vehicle in a fund.
The funds have the discretion to waive the 2% redemption fee if a fund is in jeopardy of losing its registered investment company qualification for tax purposes.
Your broker or financial advisor may charge service fees for handling redemption transactions. Your shares also may be subject to a contingent deferred sales charge (CDSC) in addition to the redemption fee.
REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE
If you purchase $1,000,000 or more of Class A shares of any fund, or if you make additional purchases of Class A shares on and after
MCF--10/05
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.
Through a Financial Advisor Contact your financial advisor, including
your retirement plan or program sponsor.
By Mail Send a written request to the transfer
agent. Requests must include (1) original
signatures of all registered
owners/trustees; (2) the name of the 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 at 1-800-959-4246 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
retirement accounts and 403(b) plans, may
not be redeemed by telephone. For funds
other than Premier Portfolio, Premier
Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio, 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. For Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, the
transfer agent must receive your call before
the last net asset value determination on a
business day 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 may 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. For funds other
than Premier Portfolio, Premier Tax-Exempt
Portfolio and Premier U.S. Government Money
Portfolio, 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. For Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, the
transfer agent must confirm your transaction
before the last net asset value
determination on a business day in order to
effect the redemption at that day's closing
price.
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MCF--10/05
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. Payment may be postponed in cases where the SEC declares an emergency or normal trading is halted.
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, but we 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, but we are
not liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC REDEMPTIONS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Redemption Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND, AIM CASH RESERVE SHARES OF AIM
MONEY MARKET FUND AND INVESTOR CLASS SHARES OF AIM MONEY MARKET FUND, AIM
TAX-EXEMPT CASH FUND, PREMIER PORTFOLIO, PREMIER TAX-EXEMPT PORTFOLIO AND
PREMIER U.S. GOVERNMENT MONEY PORTFOLIO ONLY)
You may redeem shares of these 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.
REDEMPTIONS IN KIND
Although the funds generally intend to pay redemption proceeds solely in cash, the funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
REDEMPTIONS BY THE 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 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 the fund determines that you have not provided a correct Social Security or other tax ID number on your account application, or the fund is not able to verify your identity as required by law, the 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 fund for those of another fund. An exchange is the purchase of shares in one fund which is paid for with the proceeds from a redemption of shares of another fund effectuated on the same day. Before requesting an exchange, review the prospectus of the 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."
MCF--10/05
PERMITTED EXCHANGES
Except as otherwise stated under "Exchanges Not Permitted," you generally may exchange your shares for shares of the same class of another fund.
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EXCHANGE FROM EXCHANGE TO ALLOWED PROHIBITED
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Class A Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Class A Shares of AIM Limited Maturity Treasury Fund, X
AIM Tax-Exempt Cash Fund and AIM Tax-Free Intermediate
Fund cannot be exchanged for Class A3 Shares of those
funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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Class A Class B, C, P, R or Institutional Class Shares. X
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Class A3 Class A, A3, Investor Class, or AIM Cash Reserve
Shares. Exceptions are:
- Class A3 Shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund cannot be exchanged X
for Class A Shares of those funds.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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Class A3 Class B, C, P, R or Institutional Class Shares. X
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Class B Class B. Exceptions are:
- Class B Shares of other funds cannot be exchanged for X
Class B Shares of AIM Floating Rate Fund.
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Class B Class A, A3, C, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class Shares. X
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Class C Class C. Exceptions are:
- Class C shares of other funds cannot be exchanged for X
Class C shares of AIM Floating Rate Fund.
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Class C Class A, A3, B, P, R, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
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Class R Class R X
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Class R Class A, A3, B, C, P, AIM Cash Reserve Shares,
Institutional or Investor Class shares. X
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AIM Cash Reserve Shares Class A, A3, B, C, R, or Investor Class shares.
Exceptions are:
- Class A shares of AIM Limited Maturity Treasury Fund
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
- Shares to be exchanged for Class B, C or R shares X
must not have been acquired by exchange from Class A
shares of any fund.
- Investor Class Shares of all funds are currently
offered to new investors only on a limited basis.
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AIM Cash Reserve Shares Class P or Institutional Class shares. X
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Institutional Class Institutional Class X
------------------------------------------------------------------------------------------------------------------------------------
Institutional Class Class A, A3, B, C, P, R, AIM Cash Reserve Shares or
Investor Class shares. X
------------------------------------------------------------------------------------------------------------------------------------
Investor Class A, A3, or Investor Class. Exceptions are:
- Investor Class shares cannot be exchanged for Class A
shares of any fund which offers Investor Class shares.
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
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Investor Class Class B, C, P, R, AIM Cash Reserve Shares or
Institutional Class shares. X
------------------------------------------------------------------------------------------------------------------------------------
Class P Class A, A3, or AIM Cash Reserve Shares. Exceptions
are:
- Class A shares of AIM Limited Maturity Treasury Fund X
and AIM Tax-Free Intermediate Fund are currently closed
to new investors.
------------------------------------------------------------------------------------------------------------------------------------
Class P Class B, C, R, Institutional or Investor Class shares. X
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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.
MCF--10/05
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 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 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 a 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; or
(5) Investor Class shares for Class A or Class A3 shares of any fund which does
not offer Investor Class shares.
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
For shares purchased prior to November 15, 2001, you may not exchange:
(1) Class A shares of Category I or II funds (i) subject to an initial sales
charge or (ii) purchased at net asset value and subject to a contingent
deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III funds purchased at net asset value for Class
A shares of a Category I or II fund, Class A shares of AIM Short Term Bond
Fund;
(3) 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 fund, Class A shares of AIM Short Term
Bond 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
fund (i) subject to an initial sales charge or (ii) purchased at net asset
value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money
Market Fund; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C
shares of any fund or for Class A shares of any fund that are subject to a
CDSC, however, if you originally purchased Class A shares of a Category I or
II 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 fund or AIM
Short Term Bond Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- Shares of the 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 with the exception of dividends that are reinvested; 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, a 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 funds or the distributor may modify or terminate this privilege at any time. The fund or the distributor will provide you with notice of such modification or termination whenever it is required to do so by
MCF--10/05
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 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 fund's shares is the fund's net asset value per share. The funds value portfolio securities for which market quotations are readily available at market value. The funds value all other securities and assets for which market quotations are unavailable or unreliable at their fair value in good faith using procedures approved by the Boards of Trustees of the funds. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where AIM determines that the closing price of the security is unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
AIM may use indications of fair value from pricing services approved by the Boards of Trustees. In other circumstances, the AIM valuation committee may fair value securities in good faith using procedures approved by the Boards of Trustees. As a means of evaluating its fair value process, AIM routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Boards of Trustees.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, AIM will value the security at fair value in good faith using procedures approved by the Boards of Trustees.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. AIM also relies on a screening process from a pricing vendor to indicate the degree of
MCF--10/05
certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, normally are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services 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, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service and independent quoted prices are unreliable, the AIM valuation committee will fair value the security using procedures approved by the Boards of Trustees.
Short-term Securities: The funds' short-term investments are valued at amortized cost when the security has 60 days or less to maturity. AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio value all 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.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Open-end Funds: To the extent a fund invests in other open-end funds, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
Each fund determines the net asset value of its shares on each day the NYSE is open for business (a business day), as of the close of the customary trading session, or 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 business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio determine the net asset value of their shares every fifteen minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net asset value determination on any business day for Premier Portfolio and Premier U.S. Government Money Portfolio will generally occur at 5:30 p.m. Eastern Time, and the last net asset value determination on any business day for Premier Tax-Exempt Portfolio will generally occur at 4:30 p.m. Eastern Time. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio are authorized not to open for trading on a day that is otherwise a business day if the Bond Market Association recommends that government securities dealers not open for trading and any such day will not be considered a business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio also may close early on a business day if the Bond Market Association recommends that government securities dealers close early. If Premier Portfolio, Premier Tax-Exempt Portfolio or Premier U.S. Government Money Portfolio uses its discretion to close early on a business day, the last net asset value calculation will occur as of the time of such closing.
TIMING OF ORDERS
For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day prior to the close of the customary trading session or any earlier NYSE closing time that day. For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase orders that are received and accepted before the close of the customary trading session or any earlier NYSE closing time on a business day generally are processed that day and settled on the next business day.
For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, you can purchase or redeem shares on each business day, prior to the last net asset value determination on such business day; however, if your order is received and accepted after the close of the customary trading session or any earlier NYSE closing time that day, your order generally will be processed on the next business day and settled on the second business day following the receipt and acceptance of your order.
For all funds, you can exchange shares on each business day, prior to the close of the customary trading session or any earlier NYSE closing time that day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio therefore cannot exchange their shares after the close of the customary trading session or any earlier NYSE closing time on a particular day, even though these funds remain open after such closing time.
The funds price purchase, exchange and redemption orders at the net asset value calculated after the transfer agent receives an order in good order. Any applicable sales charges are applied at the time an order is processed. A 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
MCF--10/05
type of income that the fund earns. Different tax rates apply to ordinary income, qualified dividend income, and long-term capital gain distributions. Every year, you will be sent information showing the amount of dividends and distributions you received from each fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of fund shares will be subject to federal income tax. Exchanges of shares for shares of another 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 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 fund shares is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401, 403, 408, 408A and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and Roth IRAs. You should consult your tax advisor before investing.
MCF--10/05
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. Beginning with fiscal periods ending after July 9, 2004, the fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
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 at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or
BY TELEPHONE: (800) 959-4246
ON THE INTERNET: You can send us a request by
e-mail or download
prospectuses, SAIs, annual or
semiannual reports via our
website:
http://www.aiminvestments.com
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, ARE ALSO AVAILABLE AT
HTTP://WWW.AIMINVESTMENTS.COM.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q 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 Room, 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.
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AIM Small Cap Growth Fund
SEC 1940 Act file number: 811-2699
----------------------------------------
AIMinvestments.com SCG-PRO-1
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark-- --Registered Trademark--
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STATEMENT OF
ADDITIONAL INFORMATION
AIM GROWTH SERIES
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
This Statement of Additional Information relates to the Class A, Class B, Class C, Class R and Investor Class shares of each portfolio (each a "Fund," collectively the "Funds") of AIM Growth Series listed below. This Statement of Additional Information is not a Prospectus, and it should be read in conjunction with the Prospectuses for the Class A, Class B, Class C and Class R shares of the Funds listed below. You may obtain a copy of any Prospectus for any Fund listed below from an authorized dealer or by writing to:
AIM Investment Services, Inc. P.O. Box 4739 Houston, Texas 77210-4739 or by calling (800) 959-4246
This Statement of Additional Information, dated December 14, 2005, relates to the Class A, Class B, Class C, Class R and Investor Class shares of the following Prospectuses:
FUND DATED
---- -----
AIM Basic Value Fund April 29, 2005
AIM Conservative Allocation Fund April 29, 2005
AIM Global Equity Fund October 31, 2005
AIM Growth Allocation Fund April 29, 2005
AIM Income Allocation Fund October 31, 2005
AIM International Allocation Fund October 31, 2005
AIM Mid Cap Core Equity Fund April 29, 2005
AIM Moderate Allocation Fund April 29, 2005
AIM Moderate Growth Allocation Fund April 29, 2005
AIM Moderately Conservative Allocation Fund April 29, 2005
AIM Small Cap Growth Fund December 14, 2005
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AIM GROWTH SERIES
Statement of Additional Information
Table of Contents
PAGE
GENERAL INFORMATION ABOUT THE TRUST.............................................................................. 1
Fund History............................................................................................ 1
Shares of Beneficial Interest........................................................................... 2
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS......................................................... 4
Classification.......................................................................................... 4
Investment Strategies and Risks......................................................................... 4
Asset Allocation Funds......................................................................... 4
Equity Investments............................................................................. 11
Foreign Investments............................................................................ 12
Debt Investments............................................................................... 14
Other Investments.............................................................................. 20
Investment Techniques.......................................................................... 22
Derivatives.................................................................................... 27
Additional Securities or Investment Techniques................................................. 34
Fund Policies........................................................................................... 35
Temporary Defensive Positions........................................................................... 38
Portfolio Turnover...................................................................................... 38
Policies and Procedures for Disclosure of Fund Holdings................................................. 38
MANAGEMENT OF THE TRUST.......................................................................................... 41
Board of Trustees....................................................................................... 41
Management Information.................................................................................. 41
Trustee Ownership of Fund Shares............................................................... 44
Approval of Investment Advisory Agreements and Summary of Independent Written Fee Evaluation... 44
Compensation............................................................................................ 69
Retirement Plan For Trustees................................................................... 69
Deferred Compensation Agreements............................................................... 70
Purchases of Class A Shares of the Funds at Net Asset Value.................................... 70
Codes of Ethics......................................................................................... 70
Proxy Voting Policies................................................................................... 71
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.............................................................. 71
INVESTMENT ADVISORY AND OTHER SERVICES........................................................................... 71
Investment Advisor...................................................................................... 71
Portfolio Managers............................................................................. 73
Securities Lending Arrangements................................................................ 74
Service Agreements...................................................................................... 74
Other Service Providers................................................................................. 74
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................................................... 75
Brokerage Transactions.................................................................................. 75
Commissions............................................................................................. 76
Broker Selection........................................................................................ 76
Directed Brokerage (Research Services).................................................................. 79
Regular Brokers......................................................................................... 79
Allocation of Portfolio Transactions.................................................................... 79
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PAGE
Allocation of Equity Initial Public Offering ("IPO") Transactions...................................... 79
PURCHASE, REDEMPTION AND PRICING OF SHARES...................................................................... 80
Transactions through financial intermediaries.......................................................... 80
Purchase and Redemption of Shares...................................................................... 80
Offering Price......................................................................................... 100
Redemptions In Kind.................................................................................... 101
Backup Withholding..................................................................................... 101
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS........................................................................ 102
Dividends and Distributions............................................................................ 102
Tax Matters............................................................................................ 103
DISTRIBUTION OF SECURITIES...................................................................................... 111
Distribution Plans..................................................................................... 111
Distributor............................................................................................ 113
CALCULATION OF PERFORMANCE DATA................................................................................. 114
PENDING LITIGATION.............................................................................................. 120
APPENDICES:
RATINGS OF DEBT SECURITIES...................................................................................... A-1
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS...................... B-1
TRUSTEES AND OFFICERS........................................................................................... C-1
TRUSTEE COMPENSATION TABLE...................................................................................... D-1
PROXY POLICIES AND PROCEDURES................................................................................... E-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES............................................................. F-1
MANAGEMENT FEES................................................................................................. G-1
PORTFOLIO MANAGERS.............................................................................................. H-1
ADMINISTRATIVE SERVICES FEES ................................................................................... I-1
BROKERAGE COMMISSIONS .......................................................................................... J-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF REGULAR BROKERS OR DEALERS................ K-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS......................................... L-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS................................................... M-1
TOTAL SALES CHARGES............................................................................................. N-1
PERFORMANCE DATA................................................................................................ O-1
PENDING LITIGATION ............................................................................................. P-1
FINANCIAL STATEMENTS............................................................................................ FS
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GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Growth Series (the "Trust") is a Delaware statutory trust which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of eleven separate portfolios: AIM Basic Value Fund, AIM Conservative Allocation Fund, AIM Global Equity Fund, AIM Growth Allocation Fund, AIM Income Allocation Fund, AIM International Allocation Fund, AIM Mid Cap Core Equity Fund, AIM Moderate Allocation Fund, AIM Moderate Growth Allocation Fund, AIM Moderately Conservative Allocation Fund and AIM Small Cap Growth Fund (each a "Fund" and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated May 15, 2002, as amended (the "Trust Agreement"), the Board of Trustees 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 February 19, 1985 as a Massachusetts business trust. The Trust reorganized as a Delaware business trust on May 29, 1998. The following Funds were included in the reorganization: AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund. All historical financial and other information contained in this Statement of Additional Information for periods prior to May 29, 1998 relating to these Funds (or a class thereof) is that of the predecessor funds (or the corresponding class thereof) of GT Global Growth Series, the Trust's predecessor. Effective June 5, 2000, AIM Basic Value Fund no longer invests all of its investable assets in the Value Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Value Portfolio. Effective September 11, 2000, AIM Small Cap Growth Fund no longer invests all of its investable assets in the Small Cap Portfolio and directly invests in the securities in which it previously indirectly invested by virtue of its interests in the Small Cap Portfolio. Prior to September 8, 1998, AIM Basic Value Fund was known as AIM America Value Fund and AIM Small Cap Growth Fund was known as AIM Small Cap Equity Fund. Prior to July 1, 2002, AIM Mid Cap Core Equity Fund was known as AIM Mid Cap Equity Fund (which was known as AIM Mid Cap Growth Fund prior to September 8, 1998). Prior to March 31, 2004, AIM Global Equity Fund was known as AIM Global Trends Fund. AIM Global Equity Fund succeeded to the assets and assumed the liabilities of a series portfolio with a corresponding name (the "Predecessor Fund") of AIM Series Trust, a Delaware statutory trust, on November 4, 2003. All historical information and other information contained in this Statement of Additional Information for periods prior to November 4, 2003, relating to AIM Global Equity Fund (or a class thereof) is that of the Predecessor Fund (or a corresponding class thereof). Prior to April 29, 2005, AIM Growth Allocation Fund was known as AIM Aggressive Allocation Fund. Each of the other Funds commenced operations as a series of the Trust.
Effective as of March 18, 2002, AIM Small Cap Growth Fund limited
public sales of its shares to certain investors. Also, effective as of the close
of business on February 27, 2004, AIM Mid Cap Core Equity Fund limited public
sales of its shares to certain investors. The following types of investors may
continue to invest in either 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; Qualified Tuition Programs
maintained pursuant to Section 529 of the Code; and the portfolio management team, including analysts. Such plans and programs that are considering AIM Small Cap Growth Fund or AIM Mid Cap Core Equity Fund as an investment option should contact AIM Distributors for approval. At A I M Advisors, Inc.'s ("AIM") discretion, proprietary asset allocation funds may open new accounts in the Fund.
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:
INVESTOR INSTITUTIONAL
FUND CLASS A CLASS B CLASS C CLASS R CLASS CLASS
---- ------- ------- ------- ------- -------- -------------
AIM Basic Value Fund X X X X X
AIM Conservative Allocation Fund X X X X X
AIM Global Equity Fund X X X X X
AIM Growth Allocation Fund X X X X X
AIM Income Allocation Fund X X X X X
AIM International Allocation Fund X X X X X
AIM Mid Cap Core Equity Fund X X X X X
AIM Moderate Allocation Fund X X X X X
AIM Moderate Growth Allocation Fund X X X X X
AIM Moderately Conservative Allocation Fund X X X X X
AIM Small Cap Growth Fund X X X X X X
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This Statement of Additional Information relates solely to the Class A, Class B, Class C, Class R and Investor Class shares, if applicable, of the Funds. The Institutional Class shares of the Funds which are discussed in a separate Statement of Additional Information are intended for use by certain eligible institutional investors and are available to the following:
o banks and trust companies acting in a fiduciary or similar capacity;
o bank and trust company common and collective trust funds;
o banks and trust companies investing for their own account;
o entities acting for the account of a public entity (e.g. Taft-Hartley funds, states, cities of government agencies);
o retirement plans; and
o platform sponsors with which AIM Distributors has entered into an agreement.
Each class of shares represents interests in the same portfolio of investments. Differing sales charges and expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class.
Each share of a Fund generally has the same voting, dividend, liquidation and other rights; however, each class of shares of a Fund is subject to different sales loads, conversion features, exchange privileges and class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Because Class B shares automatically convert to Class A shares at month-end eight years after the date of purchase, the Funds' distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B shareholders must also approve any material increase in distribution fees submitted to Class A or shareholders of that Fund. A pro rata portion of shares from reinvested dividends and distributions convert along with the Class B shares.
Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with AIM, and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. Other than the automatic conversion of Class B shares to Class A shares, there are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any trustee or officer; however, a trustee or officer is not protected against any liability to the Trust or to the shareholders to which a trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office with the Trust ("Disabling Conduct"). The Trust's Bylaws generally provide 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. Indemnification does not extend to judgments
or amounts paid in settlement in an action by or in the right of the Trust. The Trust's Bylaws provide for the advancement of payments to current and former trustees, officers and employees or agents of the Trust, or anyone serving at their request, in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding, expenses for which such person would be entitled to indemnification; provided that any advancement of payments would be reimbursed unless it is ultimately determined that such person is entitled to indemnification for such expenses.
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.
Asset Allocation Funds
AIM Conservative Allocation Fund, AIM Growth Allocation Fund, AIM Income Allocation Fund, AIM International Allocation Fund, AIM Moderate Allocation Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund (the "Asset Allocation Funds") are "funds of funds" which invest in other underlying funds and do not directly invest in the securities or use the investment techniques indicated in the table.
Following is the list of the Asset Allocation Funds' Underlying Funds ("Underlying Funds") and their related percentage allocations. The Underlying Funds and their percentage allocations have been selected for use over longer time periods, but may be changed in the future without shareholder approval. The actual percentage allocations will vary from the target weightings in the underlying funds due to factors such as market movements and capital flows. AIM automatically rebalances the Asset Allocation Funds' investments in the Underlying Funds on an annual basis to bring them back within their percentage allocations. AIM has the ability to rebalance on a more frequent basis if necessary. Some portion of each Asset Allocation Fund's portfolio may be held in cash due to purchase and redemption activity and other short term cash needs and the percentage allocations do not reflect the Asset Allocation Funds' working cash balances. Cash flows will be managed to help maintain target percentage allocations. AIM may change an Underlying Fund or its percentage allocation without shareholder approval.
AIM AIM
AIM AIM AIM AIM AIM MODERATE MODERATELY
CONSERVATIVE GROWTH INCOME INTERNATIONAL MODERATE GROWTH CONSERVATIVE
ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION ALLOCATION
FUND FUND FUND FUND FUND FUND FUND
------------ ---------- ---------- ------------- ---------- ---------- ------------
AIM Capital Development Fund 0% 0% 0% 0% 5% 0% 2.5%
AIM Charter Fund 5% 0% 0% 0% 0% 0% 0%
AIM Developing Markets Fund 0% 0% 0% 5% 0% 0% 0%
AIM Diversified Dividend Fund 0% 0% 15% 0% 0% 0% 0%
AIM Dynamics Fund 0% 5% 0% 0% 0% 5% 0%
AIM Global Value Fund 0% 0% 0% 27.5% 0% 0% 0%
AIM High Yield Fund 0% 5% 15% 0% 10% 10% 5%
AIM Income Fund 0% 0% 10% 0% 0% 0% 0%
AIM International Core Equity Fund 2.5% 12.5% 5% 35% 10% 11% 5%
AIM Intermediate Government Fund 0% 0% 10% 0% 0% 0% 15%
AIM International Growth Fund 0% 12.5% 0% 22.5% 7.5% 11% 2.5%
AIM International Small Company Fund 0% 0% 0% 10% 0% 0% 0%
AIM Large Cap Basic Value Fund 5% 17.5% 0% 0% 10% 14% 11.25%
AIM Large Cap Growth Fund 5% 20% 0% 0% 12.5% 16.5% 11.25%
AIM Limited Maturity Treasury Fund 15% 0% 0% 0% 0% 0% 0%
AIM Mid Cap Basic Value Fund 0% 0% 0% 0% 5% 5% 5%
AIM Multi-Sector Fund 2.5% 12.5% 0% 0% 5% 7.5% 2.5%
AIM Real Estate Fund 0% 5% 7% 0% 0% 2.5% 0%
AIM Small Cap Equity Fund 0% 0% 0% 0% 0% 7.5% 0%
AIM Small Company Growth Fund 0% 10% 0% 0% 0% 0% 0%
AIM Short Term Bond Fund 25% 0% 10% 0% 5% 0% 15%
AIM Total Return Bond Fund 25% 0% 20% 0% 25% 10% 25%
AIM Trimark Endeavor Fund 5% 0% 0% 0% 0% 0% 0%
AIM Trimark Small Companies Fund 0% 0% 0% 0% 5% 0% 0%
AIM Utilities Fund 0% 0% 8% 0% 0% 0% 0%
A money market fund or direct
investments in cash equivalents
and U.S. Government securities 10% 0% 0% 0% 0% 0% 0%
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AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM MID AIM AIM AIM
---------- AIM AIM AIM AIM AIM AIM CAP AIM MODERATE MODERATELY SMALL
SECURITY/ BASIC CONSERVATIVE GLOBAL GROWTH INCOME INTERNATIONAL CORE MODERATE GROWTH CONSERVATIVE CAP
INVESTMENT VALUE ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION GROWTH
TECHNIQUE FUND FUND* FUND FUND* FUND* FUND* FUND FUND* FUND* FUND* FUND
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
EQUITY INVESTMENTS
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Preferred Stock X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Convertible
Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Alternative Entity
Securities X X X X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
-----------------------------------------------------------------------------------------------------------------------------------
Foreign Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Foreign Government
Obligations X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Foreign Exchange
Transactions X X X X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR FIXED INCOME FUNDS
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Government
Obligations X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Rule 2a-7
Requirements X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Mortgage-Backed and
Asset-Backed
Securities X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Collateralized
Mortgage
Obligations X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Bank Instruments X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Commercial
Instruments X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Participation
Interests X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Municipal
Securities X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Municipal Lease
Obligations X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
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AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM MID AIM AIM AIM
---------- AIM AIM AIM AIM AIM AIM CAP AIM MODERATE MODERATELY SMALL
SECURITY/ BASIC CONSERVATIVE GLOBAL GROWTH INCOME INTERNATIONAL CORE MODERATE GROWTH CONSERVATIVE CAP
INVESTMENT VALUE ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION GROWTH
TECHNIQUE FUND FUND* FUND FUND* FUND* FUND* FUND FUND* FUND* FUND* FUND
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Investment Grade
Corporate Debt
Obligations X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Junk Bonds X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
DEBT INVESTMENTS FOR EQUITY FUNDS
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Government
Obligations X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Mortgage-Backed and
Asset-Backed
Securities X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Collateralized
Mortgage
Obligations X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Investment Grade
Corporate Debt
Obligations X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Junk Bonds X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Liquid Assets X X X X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
OTHER INVESTMENTS
-----------------------------------------------------------------------------------------------------------------------------------
REITs X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Other Investment
Companies X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Defaulted
Securities X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Municipal Forward
Contracts
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Variable or
Floating Rate
Instruments X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Indexed Securities X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Zero-Coupon and
Pay-in-Kind
Securities X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Synthetic Municipal
Instruments
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
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AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM MID AIM AIM AIM
---------- AIM AIM AIM AIM AIM AIM CAP AIM MODERATE MODERATELY SMALL
SECURITY/ BASIC CONSERVATIVE GLOBAL GROWTH INCOME INTERNATIONAL CORE MODERATE GROWTH CONSERVATIVE CAP
INVESTMENT VALUE ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION GROWTH
TECHNIQUE FUND FUND* FUND FUND* FUND* FUND* FUND FUND* FUND* FUND* FUND
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
INVESTMENT TECHNIQUES
-----------------------------------------------------------------------------------------------------------------------------------
Delayed Delivery
Transactions X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
When-Issued
Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Short Sales X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Margin Transactions
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Swap Agreements X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Interfund Loans X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Borrowing X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Lending Portfolio
Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Repurchase
Agreements X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Reverse Repurchase
Agreements X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Dollar Rolls X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Illiquid Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Rule 144A
Securities X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Unseasoned Issuers X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Sale of Money
Market Securities X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Standby Commitments
-----------------------------------------------------------------------------------------------------------------------------------
DERIVATIVES
-----------------------------------------------------------------------------------------------------------------------------------
Equity-Linked
Derivatives X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Bundled Securities X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
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AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM MID AIM AIM AIM
---------- AIM AIM AIM AIM AIM AIM CAP AIM MODERATE MODERATELY SMALL
SECURITY/ BASIC CONSERVATIVE GLOBAL GROWTH INCOME INTERNATIONAL CORE MODERATE GROWTH CONSERVATIVE CAP
INVESTMENT VALUE ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION GROWTH
TECHNIQUE FUND FUND* FUND FUND* FUND* FUND* FUND FUND* FUND* FUND* FUND
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Put Options X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Call Options X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Straddles X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Warrants X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Futures Contracts
and Options on
Futures Contracts X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Forward Currency
Contracts X X X X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Cover X X X X X X X X X X X
-----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL SECURITIES OR INVESTMENT TECHNIQUES
-----------------------------------------------------------------------------------------------------------------------------------
Commercial Bank
Obligations X X X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Loan Participations
and Assignments X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Indexed Commercial
Paper X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Premium Securities X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Structured
Investments X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Stripped Income
Securities X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Privatizations X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Samurai and Yankee
Bonds X X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
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AIM GROWTH SERIES
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FUND AIM MID AIM AIM AIM
---------- AIM AIM AIM AIM AIM AIM CAP AIM MODERATE MODERATELY SMALL
SECURITY/ BASIC CONSERVATIVE GLOBAL GROWTH INCOME INTERNATIONAL CORE MODERATE GROWTH CONSERVATIVE CAP
INVESTMENT VALUE ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION EQUITY ALLOCATION ALLOCATION ALLOCATION GROWTH
TECHNIQUE FUND FUND* FUND FUND* FUND* FUND* FUND FUND* FUND* FUND* FUND
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Master Limited
Partnerships X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
Investments with
Entities
with Relationships
with the
Funds/Advisors X X X X X
------------------- ----- ------------ ------ ---------- ---------- ------------- ------ ---------- ---------- ------------ ------
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* AIM Conservative Allocation Fund, AIM Growth Allocation Fund, AIM Income Allocation Fund, AIM International Allocation Fund, AIM Moderate Allocation Fund, AIM Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund are "funds of funds" which invest in other underlying funds and do not directly invest in the securities or use the investment techniques indicated in the table. The investment techniques discussed in the table above are those of the Underlying Funds.
The language below discusses investment strategies of AIM Basic Value Fund, AIM Global Equity Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund and of the Underlying Funds in which the Asset Allocation Funds may invest.
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.
Certain Funds will not acquire equity securities, other than preferred stocks, except when (a) attached to or included in a unit with income-generating securities that otherwise would be attractive to the Fund; (b) acquired through the exercise of equity features accompanying convertible securities held by the Fund, such as conversion or exchange privileges or warrants for the acquisition of stock or equity interests of the same or a different issuer; or (c) in the case of an exchange offer whereby the equity security would be acquired with the intention of exchanging it for a debt security issued on a "when-issued" basis.
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 a Fund.
Certain 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 for Equity Funds -- 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 (except for the Asset Allocation Funds and AIM Global Equity Fund) may invest up to 25% of their total assets in foreign securities. AIM Global Equity Fund may invest a significant amount of its total assets in foreign securities.
AIM Growth Allocation Fund, AIM Moderate Allocation Fund and AIM Moderate Growth Allocation Fund may invest up to 25%, 22% and 20%, respectively, of their total assets in global or international equity funds. AIM Conservative Allocation Fund and AIM Moderately Conservative Allocation Fund may invest up to 25% and 40%, respectively, of their total assets in equity funds, some of which may invest up to 25% of their total assets in foreign securities. AIM Income Allocation Fund may invest up to 35% of its assets in equity funds, most of which can invest up to 25% in foreign securities, some of which may invest more than 25% of their total assets in foreign securities. AIM International Allocation Fund invests 100% of its total assets in equity funds, all of which invest more than 80% of their total assets in foreign securities, some of which may invest 100% 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 Global Equity Fund may invest up to 20% and AIM Basic Value Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth 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 a Fund. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain emerging market countries. Many of the developing securities markets are relatively small 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 a Fund's investments.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due. Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing countries.
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts.
Each Fund has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. A Fund may commit the same percentage of its assets to foreign exchange hedges as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
Debt Investments
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, in which case, if the issuer were to default, the Funds holding securities of such issuer might not be able to recover their investment from the U.S. Government.
RULE 2A-7 REQUIREMENTS. Money market instruments in which a Fund will invest will be "Eligible Securities" as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. An Eligible Security is generally a rated security with a remaining maturity of 397 calendar days or less that has been rated by the Requisite NRSROs (as defined below) in one of the two highest short-term rating categories, or a security issued by an issuer that has received a rating by the Requisite NRSROs in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Eligible Securities may also include unrated securities determined by AIM (under the supervision of and pursuant to guidelines established by the Board) to be of comparable quality to such rated securities. If an unrated security is subject to a guarantee, to be an Eligible Security, the guarantee generally must have received a rating from a NRSRO in one of the two highest short-term rating categories or be issued by a guarantor that has received a rating from a NRSRO in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Since the Fund may invest in securities backed by banks and other financial institutions, changes in the credit quality of these institutions could cause losses to the Fund and affect their share price. The term "Requisite NRSRO" means (a) any two nationally recognized statistical rating organizations (NRSROs) that have issued a rating with respect to a security or class of debt obligations of an issuer, or (b) if only one NRSRO has issued a rating with respect to such security or issuer at the time a Fund acquires the security, that NRSRO.
The money market fund in which AIM Conservative Allocation Fund and AIM Moderately Conservative Allocation Fund invests will limit investments in money market obligations to those which are denominated in U.S. dollars and which at the date of purchase are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. Briefly, "First Tier" securities are securities that are rated in the highest rating category for short-term debt obligations by two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating category by the NRSRO, or if unrated, are determined by the Fund's investment advisor (under the supervision of and pursuant to guidelines established by the Board) to be of comparable quality to a rated security that meets the foregoing quality standards, as well as securities issued by a registered investment company that is a money market fund and U.S. Government securities.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Certain Funds may invest in mortgage-backed and asset-backed securities. Mortgage-backed securities are mortgage-related securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, or issued by nongovernment entities. Mortgage-related securities represent pools of mortgage loans assembled for sale to investors by various government agencies such as GNMA and government-related organizations such as FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage
insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured.
There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities they issue. Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest. That guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a corporation wholly owned by the U.S. Government within the Department of Housing and Urban Development. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and are guaranteed as to payment of principal and interest by FNMA itself and backed by a line of credit with the U.S. Treasury. FNMA is a government-sponsored entity wholly owned by public stockholders. Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs") guaranteed as to payment of principal and interest by FHLMC itself and backed by a line of credit with the U.S. Treasury. FHLMC is a government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property, and receivables from credit card agreements. Regular payments received in respect of such securities include both interest and principal. Asset-backed securities typically have no U.S. Government backing. Additionally, the ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-backed or other asset-backed security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages and loans underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received. When interest rates are rising, though, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-backed or other asset-backed security's average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security's return.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). Certain Funds may invest in CMOs. These Funds can also invest in mortgage-backed bonds and asset-backed securities. A CMO is a hybrid between a mortgage-backed bond and a mortgage pass-through security. Similar to a bond, interest and prepaid principal is paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage loans, but are more typically collateralized by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage
pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.
CMOs that are issued or guaranteed by the U.S. government or by any of its agencies or instrumentalities will be considered U.S. government securities by the Funds, while other CMOs, even if collateralized by U.S. government securities, will have the same status as other privately issued securities for purposes of applying the Fund's diversification tests.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates which are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC Participation Certificates ("PCs"), payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to approximately 100% of FHA prepayment experience applied to the mortgage collateral pool. All sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the "pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.
Risks of Mortgage-Related Securities. Investment in mortgage-backed securities poses several risks, including prepayment, market, and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions.
Market risk reflects the risk that the price of the security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and the Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold.
Credit risk reflects the risk that the Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-related entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.
BANK INSTRUMENTS. Certain Funds may invest in certificates of deposits, time deposits, and bankers' acceptances from U.S. or foreign banks. A bankers' acceptance is a bill of exchange or time draft drawn on and accepted by a commercial bank. A certificate of deposit is a negotiable interest-bearing instrument with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds, and normally can be traded in the secondary market prior to maturity. A time deposit is a non-negotiable receipt issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market.
Certain Funds may invest in certificates of deposit ("Eurodollar CDs") and time deposits ("Eurodollar time deposits") of foreign branches of domestic banks. Accordingly, an investment in the Fund may involve risks that are different in some respects from those incurred by an investment company which invests only in debt obligations of U.S. domestic issuers. Such risks include future political and economic developments, the possible seizure or nationalization of foreign deposits and the possible imposition of foreign country withholding taxes on interest income.
COMMERCIAL INSTRUMENTS. Certain Funds intend to invest in commercial instruments, including commercial paper, master notes and other short-term corporate instruments, that are denominated in U.S. dollars. Commercial paper consists of short-term promissory notes issued by corporations. Commercial paper may be traded in the secondary market after its issuance. Master notes are demand notes that permit the investment of fluctuating amounts of money at varying rates of interest pursuant to arrangements with issuers who meet the quality criteria of the Fund. The interest rate on a master note may fluctuate based upon changes in specified interest rates or be reset periodically according to a prescribed formula or may be a set rate. Although there is no secondary market in master demand notes, if such notes have a demand feature, the payee may demand payment of the principal amount of the note upon relatively short notice.
PARTICIPATION INTERESTS. Certain Funds 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 Lendor or 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.
MUNICIPAL SECURITIES. "Municipal Securities" include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Securities may be issued include the refunding of outstanding obligations, obtaining funds for general operating expenses and lending such funds to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds to provide for the construction, equipment, repair or improvement of privately operated housing facilities, airport, mass transit, industrial, port or parking facilities, air or water pollution control facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal. The principal and interest payments for industrial development bonds or pollution control bonds are often the sole responsibility of the industrial user and therefore may not be backed by the taxing power of the issuing municipality. The interest paid on such bonds may be exempt from federal income tax, although current federal tax laws place substantial limitations on the purposes
and size of such issues. Such obligations are considered to be Municipal Securities provided that the interest paid thereon, in the opinion of bond counsel, qualifies as exempt from federal income tax. However, interest on Municipal Securities may give rise to a federal alternative minimum tax liability and may have other collateral federal income tax consequences. See "Dividends, Distributions and Tax Matters - Tax Matters."
The two major classifications of Municipal Securities are bonds and notes. Bonds may be further classified as "general obligation" or "revenue" issues. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities, and in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Tax-exempt industrial development bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. Notes are short-term instruments which usually mature in less than two years. Most notes are general obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. There are, of course, variations in the risks associated with Municipal Securities, both within a particular classification and between classifications. The Funds' assets may consist of any combination of general obligation bonds, revenue bonds, industrial revenue bonds and notes. The percentage of such Municipal Securities held by a Fund will vary from time to time.
Municipal Securities also include the following securities:
o Bond Anticipation Notes usually are general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds.
o Tax Anticipation Notes are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. Tax anticipation notes are usually general obligations of the issuer.
o Revenue Anticipation Notes are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer.
o Tax-Exempt Commercial Paper (Municipal Paper) is similar to taxable commercial paper, except that tax-exempt commercial paper is issued by states, municipalities and their agencies.
Certain Funds also may purchase participation interests or custodial receipts from financial institutions. These participation interests give the purchaser an undivided interest in one or more underlying Municipal Securities.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease to be rated by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Services ("S&P"), or another nationally recognized statistical rating organization ("NRSRO"), or the rating of such a security may be reduced below the minimum rating required for purchase by a Fund. Neither event would require a Fund to dispose of the security, but AIM will consider such events to be relevant in determining whether the Fund should continue to hold the security. To the extent that the ratings applied by Moody's, S&P or another NRSRO to Municipal Securities may change as a result of changes in these rating systems, a Fund will attempt to use comparable ratings as standards for its investments in Municipal Securities in accordance with the investment policies described herein.
Quality Standards. The following quality standards apply at the time a security is purchased. Information concerning the ratings criteria of Moody's, S&P, and Fitch Investors Service, Inc. ("Fitch") appears herein under "Appendix A -- Ratings of Debt Securities".
If a Fund invests in securities backed by insurance companies and other financial institutions, changes in the financial condition of these institutions could cause losses to the Fund and affect its share price.
Certain Funds may invest in securities which are insured by financial insurance companies. Since a limited number of entities provide such insurance, a Fund may invest more than 25% of its assets in securities insured by the same insurance company.
Other Considerations. The ability of a Fund to achieve its investment objective depends upon the continuing ability of the issuers or guarantors of Municipal Securities held by a Fund to meet their obligations for the payment of interest and principal when due. The securities in which a Fund invests may not yield as high a level of current income as longer term or lower grade securities, which generally have less liquidity and greater fluctuation in value.
There is a risk that some or all of the interest received by the Fund from Municipal Securities might become taxable as a result of tax law changes or determinations of the Internal Revenue Service ("IRS").
The yields on Municipal Securities are dependent on a variety of factors, including general economic and monetary conditions, money market factors, conditions of the Municipal Securities market, size of a particular offering, and maturity and rating of the obligation. Generally, the yield realized by a Fund's shareholders will be the yield realized by the Fund on its investments, reduced by the general expenses of the Fund and the Trust. The market values of the Municipal Securities held by the Fund will be affected by changes in the yields available on similar securities. If yields increase following the purchase of a Municipal Security, the market value of such Municipal Security will generally decrease. Conversely, if yields decrease, the market value of a Municipal Security will generally increase.
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. Certain 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.
A Fund 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 of 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.
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).
Descriptions of debt securities ratings are found in Appendix A.
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITs"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with their respective investment objectives and policies, each Fund may invest up to 15% of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. Each Fund may purchase shares of other investment companies. As discussed previously, the Asset Allocation Funds are structured as "funds of funds" under the 1940 Act and invest in other investment companies that have AIM as an investment advisor (the "AIM Funds"). The Funds other than the Asset Allocation Funds are prohibited under the 1940 Act from purchasing shares of other AIM Funds, absent an exemptive order from the SEC. The Funds other than the Asset Allocation Funds have obtained such an exemptive order 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. As "funds of funds" under the 1940 Act, the Asset Allocation Funds are not subject to this restriction.
For each Fund other than the Asset Allocation Funds, the following restrictions apply to investments in other investment companies: (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. These restrictions do not apply to the Funds' investments in Affiliated Money Market Funds, although such investments are subject to the 25% restriction discussed above. Also, as "funds of funds" under the 1940 Act, the Asset Allocation Funds are not subject to these restrictions.
WITH RESPECT TO A FUND'S PURCHASE OF SHARES OF ANOTHER INVESTMENT COMPANY, INCLUDING AN AFFILIATED MONEY MARKET FUND AND AN UNDERLYING AIM FUND (IN THE CASE OF THE ASSET ALLOCATION FUNDS), THE FUND WILL INDIRECTLY BEAR ITS PROPORTIONATE SHARE OF THE ADVISORY FEES AND OTHER OPERATING EXPENSES OF SUCH INVESTMENT COMPANY.
DEFAULTED SECURITIES. Certain Funds may invest in defaulted securities. In order to enforce its rights in defaulted securities, a Fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the defaulted securities. This could increase a Fund's operating expenses and adversely affect its net asset value. Any investments by the Funds in defaulted securities will also be considered illiquid securities subject to the limitations described herein, unless AIM determines that such defaulted securities are liquid under guidelines adopted by the Board.
VARIABLE OR FLOATING RATE INSTRUMENTS. Certain Funds 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. Certain Funds 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. Certain Funds may 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, certain Underlying Funds 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 of 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. Certain Funds 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.
CREDIT DEFAULT SWAPS. Certain Funds may enter into Credit Default Swaps ("CDS"). A CDS is an agreement between two parties pursuant to which one party agrees to make one or more payments to the other, while the other party would assume the risk of a referenced debt obligation in the event of default. CDS may be direct ("unfunded swaps") or indirect in the form of a structured note ("funded swaps"). Unfunded and funded credit default swaps may be on a single security or packaged as a basket of CDS. The Fund may buy a CDS ("buy credit protection") in which it pays a fixed payment over the life of the swap in exchange for a counterparty taking on the risk of default of a referenced debt obligation ("Reference Entity"). Alternatively, the Fund may sell a CDS ("sell protection") in which it will receive a fixed payment in exchange for taking on the credit risk of the Reference Entity. An investment in a CDS may cause the portfolio performance to be more or less volatile.
CDS agreements are typically individually negotiated and structured. CDS agreements may be entered into for investment or hedging purposes. The Fund may enter into CDS to create direct or synthetic long or short exposure to domestic or foreign corporate debt securities or sovereign debt securities.
As a buyer of a CDS, the Fund would pay a fixed spread over the life of the agreement to the seller of the CDS. If an event of default occurs, the fixed payment stream would cease, the Fund would deliver defaulted bonds to the seller and the seller would pay the full notional value, or the "par value", of the reference obligation to the Fund. The Fund may already own the reference bonds or may purchase a deliverable bond in the market. Alternatively, the two counterparties may agree to cash settlement. If no event of default occurs, the Fund pays the fixed stream of cash flows to the seller, and no other exchange occurs.
As a seller of CDS, the Fund would receive a fixed payment stream. If an event of default occurs, the fixed payment stream stops, the Fund would pay the buyer par, and, in return, the Fund would receive deliverable bonds. Alternatively, if cash settlement is elected, the Fund would pay the buyer par less the market value of the referenced bonds. If no event of default occurs, the Fund receives the cash flow payment over the life of the agreement.
Risks of CDS include the risk that a counterparty may default on amounts owed to the Fund, basis risk (risk that the price of a derivative used to hedge or reflect an underlying bond behaves differently than the price of that bond), liquidity risk and market risk.
Credit Derivatives may create covered or uncovered exposure to the Funds. The Funds generally will employ a strategy of setting aside liquid assets to cover any potential obligation. This strategy would be employed to avoid multiplying a Fund's economic exposure and would limit risks of leveraging. For example, the Fund may sell protection on a Reference Entity bearing the risk of delivering par to the counterparty. The Fund would set aside liquid assets, marked to the market daily, to cover this potential obligation.
CDS agreements are generally governed by a single master agreement for each counterparty, and the agreements allow for netting of counterparties' obligations on specific transactions. The Fund's obligation or rights will be the net amount owed to or by the counterparty. A Fund's current obligations under a swap agreement will be accrued daily (on a net basis), and the Fund will maintain liquid assets in an amount equal to amounts owed to a swap counterparty less the value of any collateral posted. The Fund will not enter into a swap agreement with an single counterparty if the net amount owed or to be received under existing contracts with that counterparty would exceed 5% of the Fund's net assets determined on the date the CDS is entered into.
CDS Options. The Fund may additionally enter into CDS option transactions which grant the holder the right, but not the obligation, to enter into a credit default swap at a specified future date and under specified terms in exchange for a purchase price ("premium"). The writer of the option bears the risk of any unfavorable move in the value of the CDS relative to the market value on the exercise date, while the purchaser may allow the option to expire unexercised. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters -- Swap Agreements and Credit Default 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.
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. The Fund would receive income in lieu of dividends on loaned securities and would, at the same time, earn interest on the loan collateral or on the investment of any cash collateral. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the loaned securities increases and the collateral is not increased accordingly, or in the event of a default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
Any cash received as collateral for loaned securities will be invested, in accordance with a Fund's investment guidelines, in short-term money market instruments or Affiliated Money Market Funds. For purposes of determining whether a Fund is complying with its investment policies, strategies and restrictions, the Fund will consider the loaned securities as assets of the Fund, but will not consider any collateral received as a Fund asset.
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.
The investment policies of certain Underlying Funds permit them to invest in repurchase agreements with banks and broker-dealers pertaining to U.S. Treasury obligations. However, in order to maximize the Fund's dividends which are exempt from state income taxation, as a matter of operating policy, the Fund does not currently invest in repurchase agreements.
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. 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.
SALE OF MONEY MARKET SECURITIES. The money market fund in which AIM Conservative Allocation Fund and AIM Moderately Conservative Allocation Fund invests does not seek profits through short-term trading and will generally hold portfolio securities to maturity. However, AIM may seek to enhance the yield of the Fund by taking advantage of yield disparities that occur in the money markets. For example, market conditions frequently result in similar securities trading at different prices. AIM may dispose of any portfolio security prior to its maturity if such disposition and reinvestment of proceeds are expected to enhance yield consistent with AIM's judgment as to desirable portfolio maturity structure. AIM may also dispose of any portfolio security prior to maturity to meet redemption requests, and as a result of a revised credit evaluation of the issuer or other circumstances or considerations. The Fund's policy of investing in securities with maturities of 397 days or less will result in high portfolio turnover. Since brokerage commissions are not normally paid on investments of the type made by the Fund, the high turnover should not adversely affect the Fund's net income.
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).
Certain of the Underlying Funds may not invest in puts, calls, straddles, spreads or any combination thereof.
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."
BUNDLED SECURITIES. In lieu of investing directly in securities appropriate for certain Funds, those Funds may from time to time invest in trust certificates (such as TRAINS) or similar instruments representing fractional undivided interest in an underlying pool of such appropriate securities. The Funds will be permitted at any time to exchange such certificates for the underlying securities evidenced by such certificates. To that extent, such certificates are generally subject to the same risks as the underlying securities. The Funds will examine the characteristics of the underlying securities for compliance with most investment criteria but will determine liquidity with reference to the certificates themselves. To the extent that such certificates involve interest rate swaps or other derivative devices, a Fund may invest in such certificates if the Fund is permitted to engage in interest rate swaps or other such derivative devices.
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund will not write (sell) options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at any time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets.
Pursuant to federal securities rules and regulations, if a Fund writes options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
Writing Options. A Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such securities or securities convertible, into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the security, contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy, and not for speculative purposes. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If an option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the price it is willing to pay for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. A Fund may purchase a call option for the purpose of acquiring the underlying security, contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected increase in the market price of the underlying security, contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may only purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing
transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. Certain Funds, 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," received from or paid to the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
Options on Futures Contracts. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
Limitations on Futures Contracts and Options on Futures Contracts and on Certain Options on Currencies. To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%.
Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the
value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all of the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward currency contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward currency contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward currency contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward currency contract at any particular time.
(5) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving
obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair 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
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Fund's investment policies with respect to bank obligations, obligations of foreign branches of U.S. banks and of foreign banks are obligations of the issuing bank and may be general obligations of the parent bank. Such obligations, however, may be limited by the terms of a specific obligation and by government regulation. As with investment in non-U.S. securities in general, investments in the obligations of foreign branches of U.S. banks and of foreign banks may subject the Funds to investment risks that are different in some respects from those of investments in obligations of domestic issuers. Although a Fund typically will acquire obligations issued and supported by the credit of U.S. or foreign banks having total assets at the time of purchase of $1 billion or more, this $1 billion figure is not an investment policy or restriction of any Fund. For the purposes of calculation with respect to the $1 billion figure, the assets of a bank will be deemed to include the assets of its U.S. and non-U.S. branches.
INDEXED COMMERCIAL PAPER. Certain Funds 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. A 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 a fund 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.
PREMIUM SECURITIES. Certain Funds 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. A Fund might 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 a 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 a 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, a Fund will realize a loss if it holds such securities to maturity.
STRUCTURED INVESTMENTS. Certain Funds 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.
The 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 Structures Investments.
Certain issuers of Structures Investments may be deemed to be "investment companies" as defined in the 1940 Act. As a result, the 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. Certain Funds 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.
PRIVATIZATIONS. Certain 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 Fund in privatizations in appropriate circumstances. In certain foreign countries, the ability of foreign entities such as the Fund to participate may be limited by local law, or the terms on which the 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.
SAMURAI AND YANKEE BONDS. Subject to their fundamental investment restrictions, certain Funds 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 a Fund to invest in Samurai or Yankee bond issues only after taking into account considerations of quality and liquidity, as well as yield.
INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISOR. Each
Fund, other than the Asset Allocation Funds, may invest in securities issued,
sponsored or guaranteed by the following types of entities or their affiliates:
(i) entities that sell shares of the AIM Funds; (ii) entities that rate or rank
the AIM Funds; (iii) exchanges on which the AIM Funds buy or sell securities;
and (iv) entities that provide services to the AIM Funds (e.g., custodian
banks). The Funds will decide whether to invest in or sell securities issued by
these entities based on the merits of the specific investment opportunity.
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) AIM Basic Value Fund, AIM Global Equity Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth 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.
Each of the Asset Allocation Funds will 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 investment companies. 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 has adopted non-fundamental restrictions for each of the Funds relating to certain of these restrictions which AIM must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board.
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) AIM Basic Value Fund, AIM Global Equity Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth 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 Mid Cap Core Equity Fund normally invests at least 80% of its assets in equity securities, including convertible securities, of mid-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment
purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(2) AIM Small Cap Growth Fund normally invests at least 80% of its assets in securities of small-capitalization companies. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
(3) AIM Global Equity Fund normally invests at least 80% of its assets in equity securities. For purposes of the foregoing sentence, "assets" means net assets, plus the amount of any borrowings for investment purposes. The Fund will provide written notice to its shareholders prior to any change to this policy, as required by the 1940 Act Laws, Interpretations and Exemptions.
TEMPORARY DEFENSIVE POSITIONS
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, the Funds may temporarily hold all or a portion of their assets in cash, cash equivalents or U.S. Government securities. Each of the Funds other than the Asset Allocation Funds may also invest in high-quality debt instruments and may invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
PORTFOLIO TURNOVER
For the fiscal years ended December 31, 2003 and 2004, the portfolio turnover rates for AIM Global Equity Fund were 178% and 115%, respectively. This decrease was largely due to lower portfolio activity in 2004. The management team makes trades based on its assessment of the risk/return tradeoff in the marketplace, so any variation in portfolio activity from one year to the next is a function of this assessment.
POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). AIM and the Board may amend the Holdings Disclosure Policy at any time without prior notice. Details of the Holdings Disclosure Policy and a description of the basis on which employees of AIM and its affiliates may release information about portfolio securities in certain contexts are provided below.
PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following portfolio holdings information on www.aiminvestments.com(1):
APPROXIMATE DATE OF INFORMATION REMAINS
INFORMATION WEBSITE POSTING POSTED ON WEBSITE
----------- ------------------- -------------------
Top ten holdings as of month end 15 days after month end Until replaced with the
following month's top ten
holdings
Select holdings included in the 29 days after calendar quarter end Until replaced with the
Fund's Quarterly Performance Update following quarter's Quarterly
Performance Update
Complete portfolio holdings as of 30 days after calendar quarter end For one year
calendar quarter end
Complete portfolio holdings as of 60-70 days after fiscal quarter end For one year
fiscal quarter end
|
These holdings are listed along with the percentage of the Fund's net assets they represent. Generally, employees of AIM and its affiliates may not disclose such portfolio holdings until one day after they have been posted on http://www.aiminvestments.com. You may also obtain the publicly available portfolio holdings information described above by contacting us at 1-800-959-4246.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE AGREEMENT. Employees of AIM and its affiliates may disclose non-public full portfolio holdings on a selective basis only if the Internal Compliance Controls Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management") approves the parties to whom disclosure of non-public full portfolio holdings will be made. The ICCC must determine that the proposed selective disclosure will be made for legitimate business purposes of the applicable Fund and address any perceived conflicts of interest between shareholders of such Fund and AIM or its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund portfolio holdings by (1) overseeing the implementation and enforcement of the Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief Compliance Officer (or her designee) of AIM and the AIM Funds and (2) considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended) that may arise in connection with the Holdings Disclosure Policy. Pursuant to the Holdings Disclosure Policy, the Board reviews the types of situations in which AIM provides selective disclosure and approves situations involving perceived conflicts of interest between shareholders of the applicable Fund and AIM or its affiliates brought to the Board's attention by AIM.
AIM discloses non-public full portfolio holdings information to the following persons in connection with the day-to-day operations and management of the AIM Funds:
o Attorneys and accountants;
o Securities lending agents;
o Lenders to the AIM Funds;
o Rating and rankings agencies;
o Persons assisting in the voting of proxies;
o AIM Funds' custodians;
o The AIM Funds' transfer agent(s) (in the event of a redemption in kind);
o Pricing services, market makers, or other persons who provide systems or software support in connection with AIM Funds' operations (to determine the price of securities held by an AIM Fund);
o Financial printers;
o Brokers identified by the AIM Funds' portfolio management team who provide execution and research services to the team; and
o Analysts hired to perform research and analysis to the AIM Funds' portfolio management team.
In many cases, AIM will disclose current portfolio holdings on a daily basis to these persons. In these situations, AIM has entered into non-disclosure agreements which provide that the recipient of the portfolio holdings will maintain the confidentiality of such portfolio holdings and will not trade on such information ("Non-disclosure Agreements"). Please refer to Appendix B for a list of examples of persons to whom AIM provides non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules or regulations, or by regulatory authorities having jurisdiction over AIM and its affiliates or the Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive or accept any compensation (including compensation in the form of the maintenance of assets in any Fund or other mutual fund or account managed by AIM or one of its affiliates) for the selective disclosure of portfolio holdings information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the Funds, and the Funds' subadvisors, if applicable, and each of their employees may receive or have access to portfolio holdings as part of the day to day operations of the Funds.
From time to time, employees of AIM and its affiliates may express their views orally or in writing on one or more of the Funds' portfolio securities or may state that a Fund has recently purchased or sold, or continues to own, one or more securities. The securities subject to these views and statements may be ones that were purchased or sold since a Fund's most recent quarter-end and therefore may not be reflected on the list of the Fund's most recent quarter-end portfolio holdings disclosed on the website. Such views and statements may be made to various persons, including members of the press, brokers and other financial intermediaries that sell shares of the Funds, shareholders in the applicable Fund, persons considering investing in the applicable Fund or representatives of such shareholders or potential shareholders, such as fiduciaries of a 401(k) plan or a trust and their advisers, and other entities for which AIM or its affiliates provides or may provide investment advisory services. The nature and content of the views and statements provided to each of these persons may differ.
From time to time, employees of AIM and its affiliates also may provide oral or written information ("portfolio commentary") about a Fund, including, but not limited to, how the Fund's investments are divided among various sectors, industries, countries, investment styles and capitalization sizes, and among stocks, bonds, currencies and cash, security types, bond maturities, bond coupons and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to Fund performance. AIM may also provide oral or written information ("statistical information") about various financial characteristics of a Fund or its underlying portfolio securities including, but not limited to, alpha, beta, R-squared, coefficient of determination, duration, maturity, information ratio, sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about a Fund may be based on the Fund's portfolio as of the most recent quarter-end or the end of some other interim period, such as month-end. The portfolio commentary and statistical information may be provided to various persons, including those described in the preceding paragraph. The nature and content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM and its affiliates may disclose one or more of the portfolio securities of a Fund when purchasing and selling securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities, or in connection with litigation involving the Funds' portfolio securities. AIM does not enter into formal Non-disclosure Agreements in connection with these situations; however, the Funds would not continue to conduct business with a person who AIM believed was misusing the disclosed information.
DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and its affiliates manage products sponsored by companies other than AIM, including investment companies, offshore funds, and separate accounts. In many cases, these other products are managed in a similar fashion to certain AIM Funds (as defined herein) and thus have similar portfolio holdings. The sponsors of these other products managed by AIM and its affiliates may disclose the portfolio holdings of their products at different times than AIM discloses portfolio holdings for the AIM Funds.
AIM provides portfolio holdings information for portfolios of AIM Variable Insurance Funds (the "Insurance Funds") to insurance companies whose variable annuity and variable life insurance accounts invest in the Insurance Funds ("Insurance Companies"). AIM may disclose portfolio holdings information
for the Insurance Funds to Insurance Companies with which AIM has entered into Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's disclosure of similar portfolio holdings information for other AIM Funds on http://www.aiminvestments.com. AIM provides portfolio holdings information for the Insurance Funds to such Insurance Companies to allow them to disclose this information on their websites at approximately the same time that AIM discloses portfolio holdings information for the other AIM Funds on its website. AIM manages the Insurance Funds in a similar fashion to certain other AIM Funds and thus the Insurance Funds and such other AIM Funds have similar portfolio holdings. AIM does not disclose the portfolio holdings information for the Insurance Funds on its website, and not all Insurance Companies disclose this information on their websites.
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 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 C.
The standing committees of the Board are the Audit Committee, the Compliance Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Market Timing Litigation Committee.
The current members of the Audit Committee are James T. Bunch, Edward
K. Dunn, Jr. (Chair), Lewis F. Pennock, Raymond Stickel, Jr. and Dr. Larry Soll,
Dr. Prema Mathai-Davis and Ruth H. Quigley (Vice Chair). The Audit Committee's
primary purposes are to: (i) assist the Board in oversight of the independent
registered public accountant's qualifications, independence and performance;
(ii) appoint independent registered public accountants for the Funds; (iii) to
the extent required by Section 10A(h) and (i) of the Exchange Act, to
pre-approve all permissible non-audit services that are provided to Funds by
their independent registered public accountants; (iv) pre-approve, in accordance
with Rule 2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided
by the Funds' independent registered public accountants to the Funds' investment
adviser and certain other affiliated entities; (v) to oversee the financial
reporting process for the Funds; (vi) the extent required by Regulation 14A
under the Exchange Act, to prepare an audit committee report for inclusion in
any proxy statement issued by a Fund; (vii) assist the Board's oversight of the
performance of the Funds' internal audit function to the extent an internal
audit function exists; (viii) assist the Board's oversight of the integrity of
the Funds' financial statements; and (ix) assist the Board's oversight of the
Funds' compliance with legal and regulatory requirements. During the fiscal year
ended December 31, 2004, the Audit Committee held eight meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L. Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance Committee is responsible for: (i) recommending to the Board and the independent trustees the appointment, compensation and removal of the Funds' Chief Compliance Officer; (ii) recommending to the independent trustees the appointment, compensation and removal of the Funds' Senior Officer appointed pursuant to the terms of the Assurances of Discontinuance entered into by the New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii) recommending to the independent trustees the appointment and removal of AIM's
independent Compliance Consultant (the "Compliance Consultant") and reviewing
the report prepared by the Compliance Consultant upon its compliance review of
AIM (the "Report") and any objections made by AIM with respect to the Report;
(iv) reviewing any report prepared by a third party who is not an interested
person of AIM, upon the conclusion by such third party of a compliance review of
AIM; (v) reviewing all reports on compliance matters from the Funds' Chief
Compliance Officer, (vi) reviewing all recommendations made by the Senior
Officer regarding AIM's compliance procedures, (vii) reviewing all reports from
the Senior Officer of any violations of state and federal securities laws, the
Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund
shareholders and of AIM's Code of Ethics; (viii) overseeing all of the
compliance policies and procedures of the Funds and their service providers
adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time,
reviewing certain matters related to redemption fee waivers and recommending to
the Board whether or not to approve such matters; (x) receiving and reviewing
quarterly reports on the activities of AIM's Internal Compliance Controls
Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer;
(xii) reviewing and recommending to the independent trustees whether to approve
procedures to investigate matters brought to the attention of AIM's ombudsman;
(xiii) risk management oversight with respect to the Funds and, in connection
therewith, receiving and overseeing risk management reports from AMVESCAP PLC
that are applicable to the Funds or their service providers; and (xiv)
overseeing potential conflicts of interest that are reported to the Compliance
Committee by AIM, the Chief Compliance Officer, the Senior Officer and/or the
Compliance Consultant. During the fiscal year ended December 31, 2004, the
Compliance Committee held two meetings.
The members of the Governance Committee are Messrs. Bob R. Baker, Bayley, Crockett, Dowden (Chair), Jack M. Fields (Vice Chair) and Gerald J. Lewis. The Governance Committee is responsible for: (i) nominating persons who will qualify as independent trustees for (a) election as trustees in connection with meetings of shareholders of the Funds that are called to vote on the election of trustees, (b) appointment by the Board as trustees in connection with filling vacancies that arise in between meetings of shareholders; (ii) reviewing the size of the Board, and recommending to the Board whether the size of the Board shall be increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring the composition of the Board and each committee of the Board, and monitoring the qualifications of all trustees; (v) recommending persons to serve as members of each committee of the Board (other than the Compliance Committee), as well as persons who shall serve as the chair and vice chair of each such committee; (vi) reviewing and recommending the amount of compensation payable to the independent trustees; (vii) overseeing the selection of independent legal counsel to the independent trustees; (viii) reviewing and approving the compensation paid to independent legal counsel and other advisers, if any, to the Audit Committee of the Board; (ix) reviewing and approving the compensation paid to counsel and other advisers, if any, to the Audit Committee of the Board; and (x) reviewing as they deem appropriate administrative and/or logistical matters pertaining to the operations of the Board.
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
December 31, 2004, the Governance Committee held seven 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 (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Lewis, Pennock, Soll, Stickel and Carl Frischling, Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary purposes are to: (i) assist the Board in its oversight of the investment management services provided by AIM as well as
any sub-advisers; and (ii) review all proposed and existing advisory, sub-advisory and distribution arrangements for the Funds, and to recommend what action the Boards and the independent trustees take regarding the approval of all such proposed arrangements and the continuance of all such existing arrangements. During the fiscal year ended December 31, 2004, the Investments Committee held eight meetings.
The Investments Committee has established three Sub-Committees. The
Sub-Committees are responsible for: (i) reviewing the performance, fees and
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee
takes such action directly; (ii) reviewing with the applicable portfolio
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,
sub-advisory and distribution arrangements in effect or proposed for the
Designated Funds, unless the Investments Committee takes such action directly;
(iv) being familiar with the registration statements and periodic shareholder
reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the
Sub-Committee from time to time.
The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice Chair), Soll, and Mark H. Williamson (Chair) and Miss Quigley. The Valuation Committee is responsible for: (i) developing a sufficient knowledge of the valuation process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the "Pricing Procedures") in order to carry out their responsibilities; (ii) periodically reviewing information provided by AIM or other advisers regarding industry developments in connection with valuation and pricing, and making recommendations to the Board with respect to the Pricing Procedures based upon such review; (iii) reviewing the reports described in the Pricing Procedures and other information from AIM regarding fair value determinations made pursuant to the Pricing Procedures by AIM's internal valuation committee, and reporting to and making recommendations to the Board in connection with such reports; (iv) receiving the reports of AIM's internal valuation committee requesting approval of any changes to pricing vendors or pricing methodologies as required by the Pricing Procedures, receiving the annual report of AIM evaluating the pricing vendors, and approving changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures and recommending the pricing vendors for approval by the Board annually; (v) upon request of AIM, assisting AIM's internal valuation committee and/or the Board in resolving particular fair valuation issues; (vi) receiving any reports of concerns by AIM's internal valuation committee regarding actual or potential conflicts of interest by investment personnel or others that could color their input or recommendations regarding pricing issues, and receiving information from AIM disclosing differences between valuation and pricing procedures used for the Funds and private funds, if any, advised by AIM for which AIM Fund Administration has exclusive accounting responsibility, and the reasons for such differences; and (vii) in each of the foregoing areas, making regular reports to the Board. During the fiscal year ended December 31, 2004, the Valuation Committee held two meetings.
The members of the Special Market Timing Litigation Committee are Messrs. Crockett, Dowden (Vice Chair), Dunn and Lewis (Chair). The Special Market Timing Litigation Committee is responsible: (i) for receiving reports from time to time from management, counsel for management, counsel for the Funds and special counsel for the independent trustees, as applicable, related to (a) the civil lawsuits, including purported class action and shareholder derivative suits, that have been filed against the Funds concerning alleged excessive short term trading in shares of the Funds ("market timing") and (b) the civil enforcement actions and investigations related to market timing activity in the Funds that were settled with certain regulators, including without limitation the SEC, the New York Attorney General and the Colorado Attorney General, and for recommending to the independent trustees what actions, if any, should be taken by the Funds in light of all such reports; (ii) for overseeing the investigation(s) on behalf of the independent trustees by special counsel for the independent trustees and the independent trustees' financial expert of market timing activity in the Funds, and for recommending to the independent trustees what actions, if any, should be taken by the Funds in light of the results of such investigation(s); (iii) for (a) reviewing the methodology developed by AIM's Independent Distribution Consultant (the "Distribution Consultant") for the monies ordered to be paid under the settlement order with the SEC, and making recommendations to the independent trustees as to the acceptability of such methodology and
(b) recommending to the independent trustees whether to consent to any firm with
which the Distribution Consultant is affiliated entering into any employment,
consultant, attorney-client, auditing or other professional relationship with
AIM, or any of its present or former affiliates, directors, officers, employees
or agents acting in their capacity as such for the period of the Distribution
Consultant's engagement and for a period of two years after the engagement; and
(iv) for taking reasonable steps to ensure that any Fund which the Special
Market Timing Litigation Committee determines was harmed by improper market
timing activity receives what the Special Market Timing Litigation Committee
deems to be full restitution. During the fiscal year ended December 31, 2004,
the Special Market Timing Litigation Committee held seven meetings.
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 C.
Approval of Investment Advisory Agreements and Summary of Independent Written Fee Evaluation
The Board oversees the management of each Fund and, as required by law, determines annually whether to approve the continuance of each Fund's advisory agreement with AIM. Based upon the recommendation of the Investments Committee of the Board, which is comprised solely of independent trustees, at a meeting held on June 30, 2005, the Board, including all of the independent trustees, approved (i) the continuance of the advisory agreement between each Fund (other than AIM Income Allocation Fund and AIM International Allocation Fund (each a "New Fund")) and AIM for another year, effective July 1, 2005 and (ii) the advisory agreement between each New Fund and AIM for an initial period ending December 31, 2006 (collectively, the "Advisory Agreement").
The Board considered the factors discussed below in evaluating the fairness and reasonableness of each Fund's Advisory Agreement at the meeting on June 30, 2005 and as part of the Board's ongoing oversight of each Fund. In their deliberations, the Board and the independent trustees did not identify any particular factor that was controlling, and each trustee attributed different weights to the various factors.
One of the responsibilities of the Senior Officer of the Funds, who is independent of AIM and AIM's affiliates, is to manage the process by which the Funds' proposed management fees are negotiated to ensure that they are negotiated in a manner which is at arm's length and reasonable. To that end, the Senior Officer must either supervise a competitive bidding process or prepare an independent written evaluation. The Senior Officer has recommended an independent written evaluation in lieu of a competitive bidding process and, upon the direction of the Board, has prepared an independent written evaluation (which did not include the New Funds). Such written evaluation also considered certain of the factors discussed below. In addition, as discussed below, the Senior Officer made certain recommendations to the Board in connection with such written evaluation.
The discussion below serves as a summary of the Senior Officer's independent written evaluation and recommendations to the Board in connection therewith (with respect to each Fund except the New Funds), as well as a discussion of the material factors and the conclusions with respect thereto that formed the basis for the Board's approval of each Fund's Advisory Agreement (including each New Fund's Advisory Agreement). After consideration of all of the factors below and based on its informed business judgment, the Board determined that each Fund's Advisory Agreement is in the best interests of the Fund and its shareholders and that the compensation to AIM under each Fund's Advisory Agreement is fair and reasonable and would have been obtained through arm's length negotiations.
AIM BASIC VALUE FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was
appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for the one and three year periods was below the median performance of such comparable funds and above such median performance for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Large Cap Value Fund Index. The Board noted that the Fund's performance for the one and three year periods was comparable to the performance of such Index and above such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was lower than the advisory fee rate for an offshore fund for which an AIM affiliate serves as advisor with investment strategies comparable to those of the Fund; (iii) was higher than the sub-advisory fee rates for an unaffiliated mutual fund for which an affiliate of AIM serves as sub-advisor, although the total management fees paid by such unaffiliated mutual fund were higher than the advisory fee rate for the Fund; and (iv) was higher than the advisory fee rates for twenty separately managed wrap accounts managed by an AIM affiliate, and lower than the advisory fee rates for two separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was comparable to the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes three breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM CONSERVATIVE ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the
Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because the Fund has recently commenced operations.
o The performance of the Fund relative to indices. Not applicable because the Fund has recently commenced operations.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2005 in an amount necessary to limit other expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through December 31, 2005. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist
them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM GLOBAL EQUITY FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM
and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance for the one and three year periods was at or above the median performance of such comparable funds and below such median performance for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Global Multi-Cap Core Index. The Board noted that the Fund's performance in such periods was above the performance of such Index. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not serve as an advisor to other mutual funds or other clients with investment strategies comparable to those of the Fund.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund and to limit the Fund's total operating expenses, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until December 31, 2009. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2005 in an amount necessary to limit total annual operating expenses to a specified percentage of average daily net assets for each class of the Fund (other than Institutional Class shares). The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect until December 31, 2005. The Board considered the effect these fee waivers/expense limitations would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes three breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, would decrease as net assets increase because the Advisory Agreement includes breakpoints. The Board noted that, due to the Fund's current asset levels and the way in which the advisory fee breakpoints have been structured, the Fund has yet to benefit from the breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through December 31, 2009 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore would reflect economies of scale at higher asset levels and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM GROWTH ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because the Fund has recently commenced operations.
o The performance of the Fund relative to indices. Not applicable because the Fund has recently commenced operations.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment
personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2005 in an amount necessary to limit other expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through December 31, 2005. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory
Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM INCOME ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on this review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM is currently providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because this is a new Fund.
o The performance of the Fund relative to indices. Not applicable because this is a new Fund.
o Meeting with the Fund's portfolio managers and investment personnel. The Board intends to meet periodically with the Fund's portfolio managers and/or other investment personnel to ensure that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. Not applicable because this is a new Fund. However, the Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to other mutual funds advised by AIM and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Expense limitations and fee waivers. The Board reviewed AIM's proposed annual expense limitation for the Fund that would, until December 31, 2006, limit Other 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, and increases in expenses due to expense offset arrangements, if any) of each class of shares of the Fund to 0.04% of the Fund's average daily net assets, and the effect it would have on the Fund's estimated total expenses. The Board concluded that such expense limitation for the Fund was fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Profitability of AIM and its affiliates. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to approve the Advisory Agreement for the Fund, the Board also considered the Board's knowledge of AIM's operations, and concluded that it was beneficial to approve the Advisory Agreement, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services.
o Other factors and current trends. In determining whether to approve the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM INTERNATIONAL ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on this review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM is currently providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because this is a new Fund.
o The performance of the Fund relative to indices. Not applicable because this is a new Fund.
o Meeting with the Fund's portfolio managers and investment personnel. The Board intends to meet periodically with the Fund's portfolio managers and/or other investment personnel to ensure that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. Not applicable because this is a new Fund. However, the Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to other mutual funds advised by AIM and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Expense limitations and fee waivers. The Board reviewed AIM's proposed annual expense limitation for the Fund that would, until December 31, 2006, limit Other 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, and increases in
expenses due to expense offset arrangements, if any) of each class of shares of the Fund to 0.18% of the Fund's average daily net assets, and the effect it would have on the Fund's estimated total expenses. The Board concluded that such expense limitation for the Fund was fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Profitability of AIM and its affiliates. The Board noted that AIM will not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to approve the Advisory Agreement for the Fund, the Board also considered the Board's knowledge of AIM's operations, and concluded that it was beneficial to approve the Advisory Agreement, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services.
o Other factors and current trends. In determining whether to approve the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MID CAP CORE EQUITY FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was
appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance was below the median performance of such comparable funds for the one and three year periods and at such median performance for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Mid-Cap Core Index. The Board noted that the Fund's performance was below the performance of such Index for the one and three year periods and above such Index for the five year period. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that this rate (i) was the same as the advisory fee rates for a variable insurance fund advised by AIM and offered to insurance company separate accounts with investment strategies comparable to those of the Fund; (ii) was higher than the sub-advisory fee rates for three unaffiliated mutual funds for which an AIM affiliate serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund; and (iii) was higher than the advisory fee rates for 24 separately managed wrap accounts managed by an AIM affiliate with investment strategies comparable to those of the Fund, comparable to the advisory fee rates for one such wrap account, and lower than the advisory fee rates for two such wrap accounts. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was at the median rate of the funds advised by other advisors with investment strategies comparable to those of the
Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes three breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable. The Board also considered the Senior Officer's recommendation that the Board consider an additional fee waiver for the Fund due to the Fund's under-performance and relatively high historic cash position. The Board concluded that such a fee waiver was not appropriate for the Fund at this time and that, rather than requesting such a fee waiver from AIM, the Board should receive from AIM (i) additional information regarding the use of cash in the Fund's overall investment strategy
and (ii) an analysis of how the use of cash by the Fund's portfolio manager has contributed to the Fund's performance.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MODERATE ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because the Fund has recently commenced operations.
o The performance of the Fund relative to indices. Not applicable because the Fund has recently commenced operations.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2005 in an amount necessary to limit other expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through December 31, 2005. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the
Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MODERATE GROWTH ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on this review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM is currently providing services in accordance with the terms of the advisory agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the
Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM is currently providing satisfactory services in accordance with the terms of the advisory agreement.
o The performance of the Fund relative to comparable funds. Not applicable because the Fund has recently commenced operations.
o The performance of the Fund relative to indices. Not applicable because the Fund has recently commenced operations.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2006 in an amount necessary to limit other expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through December 31, 2006. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist
them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to approve the Advisory Agreement for the Fund, the Board also considered the Board's knowledge of AIM's operations, and concluded that it was beneficial to approve the Advisory Agreement, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM MODERATELY CONSERVATIVE ALLOCATION FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on this review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM is currently providing services in accordance with the terms of the advisory agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM
and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate and that AIM is currently providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. Not applicable because the Fund has recently commenced operations.
o The performance of the Fund relative to indices. Not applicable because the Fund has recently commenced operations.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Fees relative to those of comparable funds with other advisors. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive fees and/or limit expenses of the Fund through December 31, 2006 in an amount necessary to limit other expenses to a specified percentage of average daily net assets for each class of the Fund. The Board considered the contractual nature of this fee waiver/expense limitation and noted that it remains in effect through December 31, 2006. The Board considered the effect this fee waiver/expense limitation would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Investments in affiliated money market funds. Not applicable because the Fund does not invest in affiliated money market funds.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board noted that AIM does not charge the Fund any advisory fees pursuant to the Advisory Agreement, although the underlying funds in which the Fund invests pay AIM advisory fees.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to approve the Advisory Agreement for the Fund, the Board also considered the Board's knowledge of AIM's operations, and concluded that it was beneficial to approve the Advisory Agreement, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
AIM SMALL CAP GROWTH FUND
o The nature and extent of the advisory services to be provided by AIM. The Board reviewed the services to be provided by AIM under the Advisory Agreement. Based on such review, the Board concluded that the range of services to be provided by AIM under the Advisory Agreement was appropriate and that AIM currently is providing services in accordance with the terms of the Advisory Agreement.
o The quality of services to be provided by AIM. The Board reviewed the credentials and experience of the officers and employees of AIM who will provide investment advisory services to the Fund. In reviewing the qualifications of AIM to provide investment advisory services, the Board reviewed the qualifications of AIM's investment personnel and considered such issues as AIM's portfolio and product review process, various back office support functions provided by AIM and AIM's equity and fixed income trading operations. Based on the review of these and other factors, the Board concluded that the quality of services to be provided by AIM was appropriate
and that AIM currently is providing satisfactory services in accordance with the terms of the Advisory Agreement.
o The performance of the Fund relative to comparable funds. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of funds advised by other advisors with investment strategies comparable to those of the Fund. The Board noted that the Fund's performance in such periods was below the median performance of such comparable funds. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o The performance of the Fund relative to indices. The Board reviewed the performance of the Fund during the past one, three and five calendar years against the performance of the Lipper Small-Cap Growth Index. The Board noted that the Fund's performance in such periods was below the performance of such Index. The Board noted that AIM has recently made changes to the Fund's portfolio management team, which appear to be producing encouraging early results but need more time to be evaluated before a conclusion can be made that the changes have addressed the Fund's under-performance. Based on this review, the Board concluded that no changes should be made to the Fund and that it was not necessary to change the Fund's portfolio management team at this time.
o Meeting with the Fund's portfolio managers and investment personnel. With respect to the Fund, the Board is meeting periodically with such Fund's portfolio managers and/or other investment personnel and believes that such individuals are competent and able to continue to carry out their responsibilities under the Advisory Agreement.
o Overall performance of AIM. The Board considered the overall performance of AIM in providing investment advisory and portfolio administrative services to the Fund and concluded that such performance was satisfactory.
o Fees relative to those of clients of AIM with comparable investment strategies. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board noted that, based on the Fund's current assets and taking account of the breakpoints in the Fund's advisory fee schedule, this rate was comparable to the sub-advisory fee rates for two unaffiliated mutual funds for which AIM serves as sub-advisor, although the total management fees paid by such unaffiliated mutual funds were higher than the advisory fee rate for the Fund. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Fees relative to those of comparable funds with other advisors. The Board reviewed the advisory fee rate for the Fund under the Advisory Agreement. The Board compared effective contractual advisory fee rates at a common asset level and noted that the Fund's rate was below the median rate of the funds advised by other advisors with investment strategies comparable to those of the Fund that the Board reviewed. The Board noted that AIM has agreed to waive advisory fees of the Fund, as discussed below. Based on this review, the Board concluded that the advisory fee rate for the Fund under the Advisory Agreement was fair and reasonable.
o Expense limitations and fee waivers. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board considered the contractual nature of this fee waiver and noted that it remains in effect until June 30, 2006. The Board considered the
effect this fee waiver would have on the Fund's estimated expenses and concluded that the levels of fee waivers/expense limitations for the Fund were fair and reasonable.
o Breakpoints and economies of scale. The Board reviewed the structure of the Fund's advisory fee under the Advisory Agreement, noting that it includes three breakpoints. The Board reviewed the level of the Fund's advisory fees, and noted that such fees, as a percentage of the Fund's net assets, have decreased as net assets increased because the Advisory Agreement includes breakpoints. The Board noted that AIM has contractually agreed to waive advisory fees of the Fund through June 30, 2006 to the extent necessary so that the advisory fees payable by the Fund do not exceed a specified maximum advisory fee rate, which maximum rate includes breakpoints and is based on net asset levels. The Board concluded that the Fund's fee levels under the Advisory Agreement therefore reflect economies of scale and that it was not necessary to change the advisory fee breakpoints in the Fund's advisory fee schedule.
o Investments in affiliated money market funds. The Board also took into account the fact that uninvested cash and cash collateral from securities lending arrangements (collectively, "cash balances") of the Fund may be invested in money market funds advised by AIM pursuant to the terms of an SEC exemptive order. The Board found that the 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 the Fund will not receive reduced services if it invests its cash balances in such money market funds. The Board noted that, to the extent the Fund invests in affiliated money market funds, AIM has voluntarily agreed to waive a portion of the advisory fees it receives from the Fund attributable to such investment. The Board further determined that the proposed securities lending program and related procedures with respect to the lending Fund is in the best interests of the 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 the lending Fund and its respective shareholders.
o Independent written evaluation and recommendations of the Fund's Senior Officer. The Board noted that, upon their direction, the Senior Officer of the Fund had prepared an independent written evaluation in order to assist the Board in determining the reasonableness of the proposed management fees of the AIM Funds, including the Fund. The Board noted that the Senior Officer's written evaluation had been relied upon by the Board in this regard in lieu of a competitive bidding process. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the Senior Officer's written evaluation and the recommendation made by the Senior Officer to the Board that the Board consider implementing a process to assist them in more closely monitoring the performance of the AIM Funds. The Board concluded that it would be advisable to implement such a process as soon as reasonably practicable.
o Profitability of AIM and its affiliates. The Board reviewed information concerning the profitability of AIM's (and its affiliates') investment advisory and other activities and its financial condition. The Board considered the overall profitability of AIM, as well as the profitability of AIM in connection with managing the Fund. The Board noted that AIM's operations remain profitable, although increased expenses in recent years have reduced AIM's profitability. Based on the review of the profitability of AIM's and its affiliates' investment advisory and other activities and its financial condition, the Board concluded that the compensation to be paid by the Fund to AIM under its Advisory Agreement was not excessive.
o Benefits of soft dollars to AIM. The Board considered the benefits realized by AIM as a result of brokerage transactions executed through "soft dollar" arrangements. Under these arrangements, brokerage commissions paid by the Fund and/or other funds advised by AIM are used to pay for
research and execution services. This research is used by AIM in making investment decisions for the Fund. The Board concluded that such arrangements were appropriate.
o AIM's financial soundness in light of the Fund's needs. The Board considered whether AIM is financially sound and has the resources necessary to perform its obligations under the Advisory Agreement, and concluded that AIM has the financial resources necessary to fulfill its obligations under the Advisory Agreement.
o Historical relationship between the Fund and AIM. In determining whether to continue the Advisory Agreement for the Fund, the Board also considered the prior relationship between AIM and the Fund, as well as the Board's knowledge of AIM's operations, and concluded that it was beneficial to maintain the current relationship, in part, because of such knowledge. The Board also reviewed the general nature of the non-investment advisory services currently performed by AIM and its affiliates, such as administrative, transfer agency and distribution services, and the fees received by AIM and its affiliates for performing such services. In addition to reviewing such services, the trustees also considered the organizational structure employed by AIM and its affiliates to provide those services. Based on the review of these and other factors, the Board concluded that AIM and its affiliates were qualified to continue to provide non-investment advisory services to the Fund, including administrative, transfer agency and distribution services, and that AIM and its affiliates currently are providing satisfactory non-investment advisory services.
o Other factors and current trends. In determining whether to continue the Advisory Agreement for the Fund, the Board considered the fact that AIM, along with others in the mutual fund industry, is subject to regulatory inquiries and litigation related to a wide range of issues. The Board also considered the governance and compliance reforms being undertaken by AIM and its affiliates, including maintaining an internal controls committee and retaining an independent compliance consultant, and the fact that AIM has undertaken to cause the Fund to operate in accordance with certain governance policies and practices. The Board concluded that these actions indicated a good faith effort on the part of AIM to adhere to the highest ethical standards, and determined that the current regulatory and litigation environment to which AIM is subject should not prevent the Board from continuing the Advisory Agreement for the Fund.
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. The Chair of the Board and Chairs and Vice Chairs of certain committees receive additional compensation for their services.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2004 is found in Appendix D.
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. Notwithstanding the foregoing, the amount of benefits will exclude any additional compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain committees, whether such amounts are paid directly to the Trustee or deferred. 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. Crockett, Dunn, Fields, Frischling, Sklar and Drs. Mathai-Davis and Soll (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 and deemed to be invested in one or more AIM Funds selected by the Deferring Trustees. 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.
Purchases of Class A Shares of the Funds at Net Asset Value
The trustees and other affiliated persons of the Trust may purchase
Class A shares of the Funds without paying an initial sales charge. AIM
Distributors permits such purchases because there is a reduced sales effort
involved in sales to such purchasers, thereby resulting in relatively low
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on purchases of Class A shares of the Funds, see
"Purchase, Redemption and Pricing of Shares - Purchase and Redemption of Shares
- Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund - Purchases of Class A Shares at Net Asset Value."
CODES OF ETHICS
AIM, the Trust and AIM Distributors have each adopted a Code of Ethics governing, as applicable, personal trading activities of all directors/trustees, officers of the Trust, persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by any of the Funds or obtain information pertaining to such purchase or sale, and certain other employees. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading, including personal trading in most of the funds within the AIM Family of Funds(R) ("affiliated funds"). Personal trading, including personal trading involving securities that may be purchased or held by a Fund and in affiliated funds, 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 her 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. AIM 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 E.
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.
Information regarding how the Funds voted proxies related to their portfolio securities during the 12 months ended June 30, 2005 is available at our website, http://www.AIMinvestments.com. This information is also available at the SEC Website, http://www.sec.gov.
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 F. 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. AMVESCAP and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds' operations and provides investment advisory services to the Funds. AIM obtains and evaluates economic, statistical and financial information to formulate and implement investment programs for the Funds.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the services of persons believed to be competent to perform all supervisory and administrative services required by the Funds, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders.
The 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 trustee and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Trust on behalf of each Fund in connection with membership in investment company organizations, and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to its Advisory Agreement, AIM receives no advisory fee from the Asset Allocation Funds.
Pursuant to its Advisory Agreement, AIM receives a monthly fee from each Fund (other than the Asset Allocation Funds) calculated at the following annual rates, based on the average daily net assets of each Fund during the year.
Effective January 1, 2005, the advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by each Fund, other than the Asset Allocation Funds, do not exceed the maximum advisory fee rate set forth in the third column below. The maximum advisory fee rates are effective through the Committed Until Date set forth in the fourth column.
MAXIMUM ADVISORY
FEE RATES
ANNUAL RATE/NET ASSETS MAXIMUM ADVISORY FEE COMMITTED UNTIL
FUND NAME PER ADVISORY AGREEMENT RATE AFTER JANUARY 1, 2005 DATE
--------- ------------------------------- -------------------------- ----------------
AIM Basic Value Fund 0.725% of first $500M 0.695% of first $250M December 31, 2009
0.70% of the next $500M 0.67% of next $250M
0.675% of the next $500M 0.645% of next $500M
0.65% of the excess over $1.5B 0.62% of next $1.5B
0.595% of next $2.5B
0.57% of next $2.5B
0.545% of next $2.5B
0.52% of the excess over $10B
AIM Global Equity Fund 0.975% of first $500M 0.80% of first $250M December 31, 2009
0.95% of amount over $500M 0.78% of next $250M
0.925% of the next $500M 0.76% of next $500M
0.90% of the excess over $1.5B 0.74% of next $1.5B
0.72% of next $2.5B
0.70% of next $2.5B
0.68% of next $2.5B
0.66% of the excess over $10B
AIM Mid Cap Core Equity Fund 0.725% of first $500M N/A N/A
0.70% of amount over $500M
0.675% of the next $500M
0.65% of the excess over $1.5B
AIM Small Cap Growth Fund 0.725% of first $500M N/A N/A
0.70% of next $500M
0.675% of the next $500M
0.65% of the excess over $1.5B
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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 the 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 the 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 December 31, 2005, to limit AIM Global Equity Fund's Total Annual Fund Operating Expenses (excluding certain items discussed below) to 1.75%, 2.50%, 2.50% and 2.00% on AIM Global Equity Fund's Class A, Class B, Class C and Class R shares, respectively. 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 limits: (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), items designated as such by the Fund's Board; (v) expenses related to a merger or reorganization, as approved by the Fund's Board; 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. Such contractual fee waivers or reductions are set forth in the Fee Table to AIM Global Equity Fund's Prospectus and may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM and AIM Global Equity Fund.
AIM has contractually agreed to limit Other Expenses (excluding certain
items discussed below) to 0.20%, 0.17%, 0.04%, 0.18%, 0.05%, 0.12% and 0.14% on
AIM Conservative Allocation Fund, AIM Growth Allocation Fund, AIM Income
Allocation Fund, AIM International Allocation Fund, AIM Moderate Allocation
Fund, AIM Moderate Growth Allocation Fund, and AIM Moderately Conservative
Allocation Fund, respectively, for each of Class A, Class B, Class C, and Class
R shares. In determining the advisor's obligation to waive fees or reimburse
expenses, the following expenses are not taken into account, and could cause the
Other Expenses to exceed the limits: (i) Rule 12b-1 fees; (ii) interest; (iii)
taxes; (iv) dividend expense on short sales; (v) extraordinary items (these are
expenses that are not anticipated to arise from the Fund's day-to-day
operations), or items designated as such by the Fund's Board; (vi) expenses
related to a merger or reorganization, as approved by the Fund's Board; and
(vii) 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
the 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. Such contractual fee waivers or reductions are set forth in the Fee
Table to the Prospectus for the Asset Allocation Funds and may not be terminated
or amended to the Funds' detriment during the period stated in the agreement
between AIM and the Asset Allocation Funds. This expense limitation agreement is
in effect through December 31, 2005 for AIM Conservative Allocation Fund, AIM
Growth Allocation Fund, and AIM Moderate Allocation Fund and through December
31, 2006 for AIM Income Allocation Fund, AIM International Allocation Fund, AIM
Moderate Growth Allocation Fund and AIM Moderately Conservative Allocation Fund.
The management fees payable by each Fund (other than the Asset Allocation Funds), the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended December 31 are found in Appendix G.
Portfolio Managers
Appendix H contains the following information regarding the portfolio managers identified in each Fund's prospectus:
o The dollar range of the manager's investments in each Fund.
o A description of the manager's compensation structure.
o Information regarding other accounts managed by the manager and potential conflicts of interest that might arise from the management of multiple accounts.
Securities Lending Arrangements
If a Fund (other than the Asset Allocation Funds) engages in securities
lending, AIM will provide the Fund investment advisory services and related
administrative services. The Advisory Agreement describes the administrative
services to be rendered by AIM if a Fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Services to be provided include: (a) overseeing participation in the
securities lending program to ensure compliance with all applicable regulatory
and investment guidelines; (b) assisting the securities lending agent or
principal (the "agent") in determining which specific securities are available
for loan; (c) monitoring the agent to ensure that securities loans are effected
in accordance with AIM's instructions and with procedures adopted by the Board;
(d) preparing appropriate periodic reports for, and seeking appropriate
approvals from, the Board with respect to securities lending activities; (e)
responding to agent inquiries; and (f) performing such other duties as may be
necessary.
AIM's compensation for advisory services rendered in connection with securities lending is included in the advisory fee schedule. As compensation for the related administrative services AIM will provide, a lending Fund will pay AIM a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. AIM currently intends to waive such fee, and has agreed to seek Board approval prior to its receipt of all or a portion of such fee.
SERVICE AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the Advisory Agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Trust's Board of Trustees, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services.
Administrative services fees paid to AIM by each Fund for the last three fiscal years ended December 31 are found in Appendix I.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned subsidiary of AIM, acts as transfer agent for the Funds.
The Transfer Agency and Service Agreement (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain services related to the servicing of shareholders of the Funds. Other such services may be delegated or sub-contracted to third party intermediaries. For servicing accounts holding Class A, A3, B, C, P, R, AIM Cash Reserve and Investor Class Shares, the TA Agreement provides that the Trust, on behalf of the Funds, will pay AIS a fee at an annual rate of $ 21.60 per open shareholder account plus certain out of pocket expenses. This fee is paid monthly at the rate of 1/12 of the annual rate and is based upon the number of open shareholder accounts during each month. In addition, all fees payable by AIS or its affiliates to third party intermediaries who service accounts pursuant to sub-transfer agency, omnibus account services and sub-accounting agreements are charged
back to the Funds, subject to certain limitations approved by the Board of the Trust. These payments are made in consideration of services that would otherwise be provided by AIS if the accounts serviced by such intermediaries were serviced by AIS directly. For more information regarding such payments to intermediaries, see the discussion under "Administrative and Processing Support Payments" below.
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, 2 Hanson Place, Brooklyn, New York 11217-1431, 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.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The Funds' independent registered public accounting firm is responsible for auditing the financial statements of the Funds. The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002 as the independent registered public accounting firm to audit the financial statements of the Funds. Such appointment was ratified and approved by the Board.
COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
AIM makes decisions to buy and sell securities for each Fund, selects broker-dealers (each, a "Broker"), 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 best execution, which AIM defines as prompt and efficient execution of the transaction at the best obtainable price with payment of commissions, mark-ups or mark-downs which are reasonable in relation to the value of the brokerage services provided by the Broker. While AIM seeks reasonably competitive commission rates, the Funds may not pay the lowest commission or spread available. See "Broker 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 on a principal basis at net prices without commissions, but which include compensation to the Broker 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, including electronic communication networks. Purchases of underwritten issues include a commission or concession paid by the issuer (not the Funds) to the underwriter. Purchases of money market instruments may be made directly from issuers without the payment of commissions.
Traditionally, commission rates have not been negotiated on stock markets outside the United States. Although in recent years many overseas stock markets have adopted a system of negotiated rates, a number of markets maintain an established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended December 31 are found in Appendix J.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with banks and their affiliates that own 5% or more of the outstanding voting securities of an AIM Fund, provided the conditions of an exemptive order received by the AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to certain other AIM Funds or other accounts (and may invest in the 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.
BROKER SELECTION
AIM's primary consideration in selecting Brokers to execute portfolio transactions for a Fund is to obtain best execution. In selecting a Broker to execute a portfolio transaction in equity securities for a Fund, AIM considers the full range and quality of a Broker's services, including the value of research and/or brokerage services provided, execution capability, commission rate, willingness to commit capital, anonymity and responsiveness. AIM's primary consideration when selecting a Broker to execute a portfolio transaction in fixed income securities for a Fund is the Broker's ability to deliver or sell the relevant fixed income securities; however, AIM will also consider the various factors listed above. In each case, the determinative factor is not the lowest commission or spread available but whether the transaction represents the best qualitative execution for the Fund. AIM will not select Brokers based upon their promotion or sale of Fund shares.
In choosing Brokers to execute portfolio transactions for the Funds, AIM may select Brokers that provide brokerage and/or research services ("Soft Dollar Products") to the Funds and/or the other accounts over which AIM and its affiliates have investment discretion. Section 28(e) of the Securities Exchange Act of 1934, as amended, 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, a Fund may pay a Broker higher commissions than those available from another Broker in recognition of such Broker's provision of Soft Dollar Products to AIM.
AIM faces a potential conflict of interest when it uses client trades to obtain Soft Dollar Products. This conflict exists because AIM is able to use the Soft Dollar Products to manage client accounts without paying cash for the Soft Dollar Products, which reduces AIM's expenses to the extent that AIM would have purchased such products had they not been provided by Brokers. Section 28(e) permits AIM to use Soft Dollar Products for the benefit of any account it manages. Certain AIM-managed accounts may generate soft dollars used to purchase Soft Dollar Products that ultimately benefit other AIM-managed accounts, effectively cross subsidizing the other AIM-managed accounts that benefit directly from the product. AIM may not use all of the Soft Dollar Products provided by Brokers through which a Fund effects securities transactions in connection with managing such Fund.
AIM and certain of its affiliates presently engage in the following instances of cross-subsidization:
1. Fixed income funds normally do not generate soft dollar commissions to pay for Soft Dollar Products. Therefore, soft dollar commissions used to pay for Soft Dollar Products which are used to manage the fixed income AIM Funds are generated entirely by equity AIM Funds and other equity client accounts managed by AIM or A I M Capital, Inc. ("AIM Capital"), a subsidiary of AIM. In other words, the fixed income AIM Funds are cross-subsidized by the equity AIM Funds, in that the fixed income AIM Funds receive the benefit of Soft Dollar Products services for which they do not pay.
2. The investment models used to manage many of the AIM Funds are also used to manage other accounts of AIM and/or AIM Capital. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the AIM Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by both of these advisory affiliates.
This type of cross-subsidization occurs in both directions. For example, soft dollar commissions generated by transactions of the AIM Funds and/or other accounts managed by AIM are used for Soft Dollar Products which may benefit those AIM Funds and/or accounts as well as accounts managed by AIM Capital. Additionally, soft dollar commissions generated by transactions of accounts managed by AIM Capital are used for Soft Dollar Products which may benefit those accounts as well as accounts managed by AIM. In certain circumstances, AIM Capital accounts may indicate that their transactions should not be used to generate soft dollar commissions but may still receive the benefits of Soft Dollar Products received by AIM or AIM Capital.
3. Some of the common investment models used to manage various Funds and other accounts of AIM and/or AIM Capital are also used to manage accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM subsidiary. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by AIM, AIM Capital and APAM. This cross-subsidization occurs in only one direction. Most of APAM's accounts do not generate soft dollar commissions which can be used to purchase Soft Dollar Products. The soft dollar commissions generated by transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used for Soft Dollar Products which may benefit the accounts managed by AIM, AIM Capital and APAM; however, APAM does not provide any soft dollar research benefit to the Funds and/or other accounts managed by AIM or AIM Capital.
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts of interest concerning the use of Soft Dollar Products by directing client trades for Soft Dollar Products only if AIM and AIM Capital conclude that the Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a hard dollar basis; other Soft Dollar Products are available only through Brokers in exchange for soft dollars. AIM uses soft dollars to purchase two types of Soft Dollar Products:
o proprietary research created by the Broker executing the trade, and
o other products created by third parties that are supplied to AIM through the Broker executing the trade.
Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in house research staffs of broker-dealer firms. This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information
and assistance. AIM periodically rates the quality of proprietary research produced by various Brokers. Based on the evaluation of the quality of information that AIM receives from each Broker, AIM develops an estimate of each Broker's share of AIM clients' commission dollars. AIM attempts to direct trades to the firms to meet these estimates.
AIM also uses soft dollars to acquire products from third parties that are supplied to AIM through Brokers executing the trades or other Brokers who "step in" to a transaction and receive a portion of the brokerage commission for the trade. AIM may from time to time instruct the executing Broker to allocate or "step out" a portion of a transaction to another Broker. The Broker to which AIM has "stepped out" would then settle and complete the designated portion of the transaction, and the executing Broker would settle and complete the remaining portion of the transaction that has not been "stepped out." Each Broker may receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes.
Soft Dollar Products received from Brokers supplement AIM's own research (and the research of certain of its affiliates), and may include the following types of products and services:
o Database Services -- comprehensive databases containing current and/or historical information on companies and industries and indices. Examples include historical securities prices, earnings estimates and financial data. These services may include software tools that allow the user to search the database or to prepare value-added analyses related to the investment process (such as forecasts and models used in the portfolio management process).
o Quotation/Trading/News Systems -- products that provide real time market data information, such as pricing of individual securities and information on current trading, as well as a variety of news services.
o Economic Data/Forecasting Tools -- various macro economic forecasting tools, such as economic data or currency and political forecasts for various countries or regions.
o Quantitative/Technical Analysis -- software tools that assist in quantitative and technical analysis of investment data.
o Fundamental/Industry Analysis -- industry specific fundamental investment research.
o Fixed Income Security Analysis -- data and analytical tools that pertain specifically to fixed income securities. These tools assist in creating financial models, such as cash flow projections and interest rate sensitivity analyses, which are relevant to fixed income securities.
o Other Specialized Tools -- other specialized products, such as consulting analyses, access to industry experts, and distinct investment expertise such as forensic accounting or custom built investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it also serves functions that do not assist the investment decision-making or trading process), AIM will allocate the costs of such service or product accordingly in its reasonable discretion. AIM will allocate brokerage commissions to Brokers only for the portion of the service or product that AIM determines assists it in the investment decision-making or trading process and will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM tend to provide more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. In addition, such services provide AIM with a diverse perspective on financial markets. Some Brokers 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 in the execution of transactions in portfolio
securities. In some cases, Soft Dollar Products are available only from the Broker providing them. In other cases, Soft Dollar Products may be obtainable from alternative sources in return for cash payments. AIM believes that because Broker research supplements rather than replaces AIM's research, the receipt of such research tends to improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. To the extent the Funds' portfolio transactions are used to obtain Soft Dollar Products, the brokerage commissions obtained by the Funds might exceed those that might otherwise have been paid.
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 may be effected through Brokers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients, provided that AIM believes such Brokers provide best execution and such transactions are executed in compliance with AIM's policy against using directed brokerage to compensate Brokers for promoting or selling AIM Fund shares. 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 December 31, 2004 are found in Appendix K.
REGULAR BROKERS
Information concerning the Funds' acquisition of securities of their regular Brokers during the last fiscal year ended December 31, 2004 is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other 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 other accounts. However, the position of each account in the same security and the length of time that each account may hold its investment in the same security 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 other accounts, and is considered at or about the same time, AIM will allocate transactions in such securities among the Fund(s) and these accounts on a pro rata basis based on order size or in such other manner believed by AIM to be fair and equitable. 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.
ALLOCATION OF EQUITY INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in equity IPOs. Purchases of equity IPOs by one AIM Fund or other account may also be considered for purchase by one or more other AIM Funds or accounts. AIM shall combine indications of interest for equity IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO. When the full amount of all IPO orders for such AIM Funds and accounts cannot be filled completely, AIM shall 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 equity IPO by reviewing a number of factors, including market capitalization/liquidity suitability and sector/style suitability of the investment with the AIM Fund's or account's investment objective,
policies, strategies and current holdings. AIM will allocate equity securities issued in IPOs to eligible AIM Funds and accounts on a pro rata basis based on order size.
PURCHASE, REDEMPTION AND PRICING OF SHARES
TRANSACTIONS THROUGH FINANCIAL INTERMEDIARIES
If you are investing indirectly in a Fund through a financial intermediary such as a broker-dealer, a bank (including a bank trust department), an insurance company separate account, an investment advisor, an administrator or trustee of a retirement plan or a qualified tuition plan or a sponsor of a fee-based program that maintains a master account (an omnibus account) with the Fund for trading on behalf of its customers, different guidelines, conditions and restrictions may apply than if you held your shares of the Fund directly. These differences may include, but are not limited to: (i) different eligibility standards to purchase and sell shares, different eligibility standards to invest in funds with limited offering status and different eligibility standards to exchange shares by telephone; (ii) different minimum and maximum initial and subsequent purchase amounts; (iii) system inability to provide Letter of Intent privileges; and (iv) different annual amounts (less than 12%) subject to withdrawal under a Systematic Redemption Plan without being subject to a contingent deferred sales charge. The financial intermediary through whom you are investing may also choose to adopt different exchange and/or transfer limit guidelines and restrictions, including different trading restrictions designed to discourage excessive or short-term trading. The financial intermediary through whom you are investing may also choose to impose a redemption fee that has different characteristics, which may be more or less restrictive, than the redemption fee currently imposed on certain Funds.
If the financial intermediary is managing your account, you may also be charged a transaction or other fee by such financial intermediary, including service fees for handling redemption transactions. Consult with your financial intermediary (or, in the case of a retirement plan, your plan sponsor) to determine what fees, guidelines, conditions and restrictions, including any of the above, may be applicable to you.
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 Money Market Fund , AIM Tax-Exempt Cash 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. Additionally, Class A shares of AIM Short Term Bond Fund are subject to an initial sales charge of 2.50%. 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 Advantage Health Sciences Fund AIM International Small Company Fund AIM Aggressive Growth Fund AIM International Growth Fund AIM Asia Pacific Growth Fund AIM Large Cap Basic Value Fund AIM Basic Balanced Fund AIM Large Cap Growth Fund AIM Basic Value Fund AIM Leisure Fund AIM Blue Chip Fund AIM Mid Cap Basic Value Fund AIM Capital Development Fund AIM Mid Cap Core Equity Fund AIM Charter Fund AIM Mid Cap Growth Fund AIM Conservative Allocation Fund AIM Moderate Allocation Fund AIM Constellation Fund AIM Moderate Growth Allocation Fund AIM Developing Markets Fund AIM Moderately Conservative Allocation Fund AIM Diversified Dividend Fund AIM Multi-Sector Fund AIM Dynamics Fund AIM Opportunities I Fund AIM Energy Fund AIM Opportunities II Fund AIM European Growth Fund AIM Opportunities III Fund AIM European Small Company Fund AIM Premier Equity Fund AIM Financial Services Fund AIM Real Estate Fund AIM Global Aggressive Growth Fund AIM Select Equity Fund AIM Global Equity Fund AIM Small Cap Equity Fund AIM Global Growth Fund AIM Small Cap Growth Fund AIM Global Health Care Fund AIM Small Company Growth Fund AIM Global Real Estate Fund AIM Summit Fund AIM Global Value Fund AIM Technology Fund AIM Gold & Precious Metals Fund AIM Trimark Endeavor Fund AIM Growth Allocation Fund AIM Trimark Fund AIM Income Allocation Fund AIM Trimark Small Companies Fund AIM International Allocation Fund AIM Utilities Fund AIM International Core Equity 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 High Income Municipal Fund AIM Intermediate Government Fund AIM High Yield Fund AIM Municipal Bond Fund AIM Income Fund AIM Total Return Bond Fund |
Dealer
Investor's Sales Charge Concession
--------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- -------------
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
|
CATEGORY III FUNDS
AIM Limited Maturity Treasury Fund
AIM Tax-Free Intermediate Fund
Dealer
Investor's Sales Charge Concession
--------------------------- -------------
As a As a As a
Percentage Percentage Percentage
of the Public of the Net of the Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- -------------
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
|
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 Fund 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 ("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. Large Purchases of Class A shares by investors who were Class K shareholders of record on October 21, 2005 are not subject to a CDSC.
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 public offering price 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 or AIM Short Term Bond 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 and after November 15, 2001 and through October 31, 2002 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 and additional dealer concession upon the exchange. Beginning February 17, 2003, Class A shares of a Category III Fund may not be exchanged for Class A shares of another Category III Fund.
PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AND AIM SHORT TERM BOND FUND AT NAV. 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 that the applicable dealer of record is able to establish that the retirement plan's purchase of Class A shares is a new investment (as defined below):
PERCENT OF PURCHASE
0.50% of the first $20 million
plus 0.25% of amounts in excess of $20 million
This payment schedule will be applicable to purchases of Class A shares at NAV by the following types of retirement plans: (i) all plans maintained pursuant to Sections 401 and 457 of the Code, and (ii) plans maintained pursuant to Section 403 of the Code if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code.
A "new investment" means a purchase paid for with money that does not represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii) an exchange of AIM Fund shares, or (iii) the repayment of one or more retirement plan loans that were funded through the redemption of AIM Fund shares, or (iv) money returned from another fund family. 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."
DEFINITIONS
As used herein, the terms below shall be defined as follows:
o "Individual" refers to a person, as well as his or her Spouse or Domestic Partner and his or her Children;
o "Spouse" is the person to whom one is legally married under state law;
o "Domestic Partner" is an adult with whom one shares a primary residence for at least six-months, is in a relationship as a couple where one or each of them provides personal or financial welfare of the other without a fee, is not related by blood and is not married;
o "Child" or "Children" include a biological, adopted or foster son or daughter, a Step-child, a legal ward or a Child of a person standing in loco parentis;
o "Parent" is a person's biological or adoptive mother or father;
o "Step-child" is the child of one's Spouse by a previous marriage or relationship;
o "Step-parent" is the Spouse of a Child's Parent; and
o "Immediate Family" includes an Individual (including, as defined above, a person, his or her Spouse or Domestic Partner and his or her Children) as well as his or her Parents, Step-parents and the Parents of Spouse or Domestic Partner.
INDIVIDUALS
o an Individual (including his or her spouse or domestic partner, and children);
o 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
o 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
o a retirement plan maintained pursuant to Sections 401, 403 (only if the employer or plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3) of the Code), 408 (includes SEP, SARSEP and SIMPLE IRA plans) or 457 or 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.
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. Employer-sponsored retirement plans, with the exception of Solo 401(k) plans and SEP plans, are not eligible for a 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
o 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).
o 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.
o 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.
o 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
o 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.
o 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.
o 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.
o The Transfer Agent will process necessary adjustments upon the expiration or completion date of the LOI.
Fulfilling the Intended Investment
o 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.
o 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.
o 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.
o Shareholders of AIM Basic Balanced Fund, AIM Developing Markets Fund, AIM Global Aggressive Growth Fund, AIM Global Equity Fund, AIM Global Growth Fund, AIM Global Health Care Fund and AIM Real Estate Fund who have a Letter of Intent in place as of November 1, 2005, will be able to complete the Letter of Intent under the current pricing schedule, and future Letters of Intent or subsequent purchases will be subject to the Category I pricing.
Canceling the LOI
o 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.
o 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 contract purchased on or before June 30, 1992.
If an investor's new purchase of Class A shares of a Category I or II Fund 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 certain programs for purchase.
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:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members of their immediate family) of AIM Management, its affiliates or The AIM Family of Funds--Registered Trademark--; any foundation, trust or employee benefit plan established exclusively for the benefit of, or by, such persons;;
o 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.;
o 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;
o Purchases through approved fee-based programs;
o 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. there are at least 100 employees eligible to participate in the plan;
c. 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
d. 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
e. purchases of AIM Opportunities I Fund by all retirement plans are subject to initial sales charges;
o Shareholders of record of Advisor Class shares of AIM International Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who have continuously owned shares of the AIM Funds;
o Shareholders of record or discretionary advised clients of any investment advisor holding shares of AIM Weingarten Fund or AIM Constellation Fund on September 8, 1986, or of AIM Charter Fund on November 17, 1986, who have continuously owned shares having a market value of at least $500 and who purchase additional shares of the same Fund;
o Unitholders of G/SET series unit investment trusts investing proceeds from such trusts in shares of AIM Weingarten Fund or AIM Constellation Fund; provided, however, prior to the termination date of the trusts, a unitholder may invest proceeds from the redemption or
repurchase of his units only when the investment in shares of AIM Weingarten Fund and AIM Constellation Fund is effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM Fund or that sells its assets to an AIM Fund in exchange for shares of an AIM Fund;
o Shareholders of the former GT Global funds as of April 30, 1987 who since that date continually have owned shares of one or more of these funds;
o Certain former AMA Investment Advisers' shareholders who became shareholders of the AIM Global Health Care Fund in October 1989, and who have continuously held shares in the former GT Global funds since that time;
o Shareholders of record of Advisor Class shares of an AIM Fund on February 11, 2000 who have continuously owned shares of that AIM Fund, and who purchase additional shares of that AIM Fund;
o Qualified Tuition Programs created and maintained in accordance with Section 529 of the Code;
o Insurance company separate accounts;
o Additional purchases of Class A shares by shareholders of record of Class K shares on October 21, 2005 whose Class K shares were converted to Class A shares;
o 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) if:
a. such plan is funded by a rollover of assets from an Employer-Sponsored Retirement Plan;
b. the account being funded by such rollover is to be maintained by the same trustee, custodian or administrator that maintained the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof; and
c. the dealer of record with respect to the account being funded by such rollover is the same as the dealer of record with respect to the plan from which the rollover distribution funding such rollover originated, or an affiliate thereof.
o Transfers to IRAs that are attributable to AIM Fund investments held in 403(b)(7)s, SIMPLES, SEPs, SARSEPs, Traditional or Roth IRAs; and
o Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPs, Money Purchase Plans, and Profit Sharing Plans if the assets are transferred to an AIM IRA.
o In addition, an investor may acquire shares of any of the AIM Funds at net asset value in connection with:
o the reinvestment of dividends and distributions from a Fund;
o exchanges of shares of certain Funds as more fully described in the Prospectus;
o the purchase of shares in connection with the repayment of a retirement plan loan administered by AIM Investment Services, Inc., or
o 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.
The financial advisor through which you purchase your shares may receive all or a portion of the sales charges and Rule 12b-1 distribution fees discussed above. In addition to those payments, AIM Distributors or one or more of its corporate affiliates (collectively, the "ADI Affiliates") may make additional cash payments to financial advisors in connection with the promotion and sale of shares of AIM funds. ADI Affiliates makes these payments from its own resources, from AIM Distributors' retention of underwriting concessions and from payments to AIM Distributors under Rule 12b-1 plans. These additional cash payments are described below. The categories described below are not mutually exclusive. The same financial advisor may receive payments under more than one or all categories. Most financial advisors that sell shares of AIM funds receive one or more types of these cash payments. Financial advisors negotiate the cash payments to be paid on an individual basis. Where services are provided, the costs of providing the services and the overall package of services provided may vary from one financial advisor to another. ADI Affiliates do not make an independent assessment of the cost of providing such services.
In this context, "financial advisors" include any broker, dealer, bank (including bank trust departments), transfer agent, registered investment advisor, financial planner, retirement plan administrator and any other financial intermediary having a selling, administration or similar agreement with ADI Affiliates.
REVENUE SHARING PAYMENTS. ADI Affiliates makes revenue sharing payments as incentives to certain financial advisors to promote and sell shares of AIM funds. The benefits ADI Affiliates receives when it makes these payments include, among other things, placing AIM funds on the financial advisor's funds sales system, placing AIM funds on the financial advisor's preferred or recommended fund list, and access (in some cases on a preferential basis over other competitors) to individual members of the financial advisor's sales force or to the financial advisor's management. Revenue sharing payments are sometimes referred to as "shelf space" payments because the payments compensate the financial advisor for including AIM funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensates financial advisors differently depending typically on the level and/or type of considerations provided by the financial advisor. In addition, payments typically apply only to retail sales, and may not apply to other types of sales or assets (such as sales to retirement plans, qualified tuition programs, or fee based advisor programs -- some of which may be generate certain other payments described below.)
The revenue sharing payments ADI Affiliates makes 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 financial advisor during the particular period. Such payments also may be calculated on the average daily net assets of the applicable AIM funds attributable to that particular financial advisor ("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. Sales-Based Payments primarily create incentives to make new sales of shares of AIM funds and Asset-Based Payments primarily create incentives to retain previously sold shares of AIM funds in investor accounts. ADI Affiliates may pay a financial advisor either or both Sales-Based Payments and Asset-Based Payments.
ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares for certain administrative services, including record keeping and sub-accounting shareholder accounts. Payments for these services typically do not exceed 0.25% of average annual assets or $19 per annum per shareholder account. ADI Affiliates also may make payments to certain financial advisors that sell AIM Fund shares in connection with client account
maintenance support, statement preparation and transaction processing. The types of payments that AIM may make under this category include, among others, payment of ticket charges per purchase or exchange order placed by a financial advisor, payment of networking fees of up to $12 per shareholder account maintained on certain mutual fund trading systems, or one-time payments for ancillary services such as setting up funds on a financial advisor's mutual fund trading systems.
OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at its expense, may provide additional compensation to financial advisors which sell or arrange for the sale of shares of the Fund. Such compensation provided by ADI Affiliates may include financial assistance to financial advisors that enable ADI Affiliates to participate in and/or present at conferences or seminars, sales or training programs for invited registered representatives and other employees, client entertainment, client and investor events, and other financial advisor-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with client prospecting, retention and due diligence trips. Other compensation may be offered to the extent not prohibited by state laws or any self-regulatory agency, such as the NASD. ADI Affiliates makes payments for entertainment events it deems appropriate, subject to ADI Affiliates guidelines and applicable law. These payments may vary depending upon the nature of the event or the relationship.
ADI Affiliates is motivated to make the payments described above since they promote the sale of AIM fund shares and the retention of those investments by clients of financial advisors. To the extent financial advisors sell more shares of AIM funds or retain shares of AIM funds in their clients' accounts, ADI Affiliates benefits from the incremental management and other fees paid to ADI Affiliates by the AIM funds with respect to those assets.
In certain cases these payments could be significant to the financial advisor. Your financial advisor may charge you additional fees or commissions other than those disclosed in this prospectus. You can ask your financial advisor about any payments it receives from ADI Affiliates or the AIM funds, as well as about fees and/or commissions it charges.
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. Class K shares
converted to Class A shares at the close of business on October 21, 2005. The CDSC (described above) will continue to apply if all retirement plan assets are redeemed within 12 months from the date of the retirement plan's initial purchase.
Class K Shares
Class K shares converted to Class A shares at the close of business on October 21, 2005. If AIM Distributors paid a concession at the time of sale to the dealer of record, the Class K shares were subject to a 0.70% CDSC at the time of redemption if all retirement plan assets were redeemed within one year from the date of the retirement plan's initial purchase. This CDSC will continue to apply if all retirement plan assets are redeemed within 12 months from the date of the retirement plan's initial purchase.
Payments With Regard to Class K Shares
For Class A shares acquired by a former Class K shareholder (i) as a result of a fund merger; or (ii) as a result of the conversion of Class K shares into Class A shares on October 21, 2005, AIM Distributors will pay financial intermediaries 0.45% on such Class A shares as follows: (i) 0.25% from the Class A shares' Rule 12b-1 plan fees; and (ii) 0.20% from AIM Distributors' own resources provided that, on an annualized basis for 2005 as of October 21, 2005, the 0.20% exceeds $2,000 per year.
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 or AIM Short Term Bond Fund, 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 CDSC. AIM Distributors may pay dealers and institutions an annual fee of 0.25% of average daily net assets and such payments will commence immediately.
Purchases of Institutional Class Shares
Institutional Class shares are sold at net asset value, and are not subject to an initial sales charge or to a CDSC.
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 $50 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 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. See the Prospectus for additional information regarding CDSCs.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A SHARES. An investor who has made a Large Purchase of Class A shares of a Category I, II, 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:
o Redemptions of shares of Category I or II Funds or AIM Short Term Bond Fund held more than 18 months;
o Redemptions of shares of Category III Funds purchased prior to November 15, 2001 or after October 30, 2002;
o 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;
o 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;
o Redemptions from private foundations or endowment funds;
o 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;
o Redemptions of shares of Category I, II or III Funds, 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;
o 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;
o 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;
o 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;
o 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;
o 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
o 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:
o Total or partial redemptions resulting from a distribution following retirement in the case of a tax-qualified employer-sponsored retirement;
o 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;
o 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;
o Redemptions made in connection with participant-directed exchanges between options in an employer-sponsored benefit plan;
o Redemptions made for the purpose of providing cash to fund a loan to a participant in a tax-qualified retirement plan;
o Redemptions made in connection with a distribution from any retirement plan or accounts that is permitted in accordance with the provisions of Section 72(t)(2) of the Code, and the regulations promulgated thereunder;
o 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
o 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:
o Additional purchases of Class C shares of AIM International Core Equity 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;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time
of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70 1/2 or
older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular
AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of
the type described above invested in Class B or Class C shares
of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined
in the Code) of the participant or beneficiary;
o 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;
o Liquidation by the AIM Fund when the account value falls below the minimum required account size of $500; and
o Investment account(s) of AIM.
CDSCs will not apply to the following redemptions of Class C shares:
o A total or partial redemption of shares where the investor's dealer of record notifies the distributor prior to the time of investment that the dealer waives the upfront payment otherwise payable to him;
o 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;
o Redemptions of Class C shares of a 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
o 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 Fund and the original purchase was subject to a CDSC.
Contingent Deferred Sales Charge Exceptions for Class R Shares and Former Class K Shareholders that Acquired Class A Shares
CDSCs will not apply to redemptions of Class A shares acquired as a result of conversion of Class K shares into Class A shares where the retirement plan's dealer of record notified the distributor prior to the time of purchase that the dealer waived the upfront payment otherwise payable to him.
CDSCs will not apply to the following redemptions of Class R shares:
o A total or partial redemption of 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
o Redemptions of shares held by retirement plans in cases where
(i) the plan has remained invested in Class R shares of a 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. The Fund will be deemed to have received the purchase or redemption order when the Fund's authorized agent 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.
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's 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 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
The following formula may be used to determine the public offering price per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering Price.
For example, at the close of business on December 31, 2004, AIM Basic Value Fund -- Class A shares had a net asset value per share of $32.34. The offering price, assuming an initial sales charge of 5.50%, therefore was $34.31.
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, futures and option contracts generally will be valued 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 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 statement due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
Each equity 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 equity 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 vendors 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. Debt securities (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing vendor. Evaluated quotes provided by the pricing vendor 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, including situations where market quotations are unreliable, are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in accordance with procedures approved by the Board. Short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Generally, trading in corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of a Fund's shares are determined at such times. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE. If AIM believes a development/event has actually caused a closing price to no longer reflect current market value, the closing price may be adjusted to reflect the fair value of the affected security as of the close of the NYSE as determined in good faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. Trading in certain 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. If an issuer specific event has occurred that AIM determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. Issuer specific events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. AIM also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing vendor to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Multiple factors may be considered by the pricing vendor 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 that 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 value of the portfolio securities of a Fund that invests in foreign securities may change on days when an investor cannot exchange or redeem shares of the Fund.
REDEMPTIONS IN KIND
Although the Funds generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). For instance, a Fund may make a redemption in kind if a cash redemption would disrupt its operations or performance. Securities that will be delivered as payment in redemptions in kind will be valued using the same methodologies that the Fund typically utilizes in valuing such securities. 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. The Trust, on behalf of the Funds, has made an election under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore, the Trust, on behalf of a 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. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.
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, except AIM Income Allocation Fund, to declare and pay annually net investment income dividends and capital gain distributions. AIM Income Allocation Fund will declare and pay dividends quarterly and capital gains annually. It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gain. In determining the amount of capital gains, if any, available for distribution, capital gains will generally be offset against available net capital losses, 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.
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.
Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain (i.e., the excess of net long-term capital gain over net short-term capital loss) for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.
Each Fund may use "equalization accounting" in determining the portion of its net investment income and capital gain net income that has been distributed. A Fund that elects to use equalization accounting will allocate a portion of its realized investment income and capital gain to redemptions of Fund shares and will reduce the amount of such income and gain that it distributes in cash. However, each Fund intends to make cash distributions for each taxable year in an aggregate amount that is sufficient to satisfy the Distribution Requirement without taking into account its use of equalization accounting. The Internal Revenue Service has not published any guidance concerning the methods to be used in allocating investment income and capital gain to redemptions of shares. In the event that the Internal Revenue Service determines that a Fund is using an improper method of allocation and has underdistributed its net investment income and capital gain net income for any taxable year, such Fund may be liable for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated investment company must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies (to the extent such currency gain is directly related to the regulated investment company's principal business of investing in stock or securities), 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 and net income derived from certain publicly traded partnerships (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 or, collectively, in securities of certain publicly traded partnerships.
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.
Under an IRS revenue procedure, a Fund may treat its position as lender under a repurchase agreement as a U.S. Government security for purposes of the Asset Diversification where the repurchase agreement is fully collateralized (under applicable SEC standards) with securities that constitute U.S. Government securities.
If for any taxable year a Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of such Fund's current and accumulated earnings and profits. Such distributions generally will be eligible for the dividends received deduction in the case of corporate shareholders and will be included in the qualified dividend income of noncorporate shareholders. See "Fund Distributions" below.
Asset Allocation Funds
An Asset Allocation Fund will invest its assets in shares of the Underlying Funds, cash and money market instruments. Accordingly, an Asset Allocation Fund's income will consist of distributions from the Underlying Funds, net gains realized from the disposition of Underlying Fund shares and interest. If an Underlying Fund qualifies for treatment as a regulated investment company under the Code -- each has done so for its past taxable years and intends to continue to do so for its current and future taxable years -- (1) dividends paid to an Asset Allocation Fund from the Underlying Fund's investment company taxable income (which may include net gains from certain foreign currency transactions and net short-term capital gains) will be taxable to an Asset Allocation Fund as ordinary income, (2) dividends paid to an Asset Allocation Fund that an Underlying Fund designates as capital gain dividends (as discussed below) will be taxable to an Asset Allocation Fund as long-term capital gain, (3) dividends paid to an Asset Allocation Fund that an Underlying Fund designates as qualifying dividends from domestic corporations (as discussed below) will be treated as dividends eligible for the dividends received deduction and (4) dividends paid to an Asset Allocation Fund that an Underlying Fund designates as qualified dividend income (as discussed below) will be treated by the Asset Allocation Fund as qualifying dividends taxable at a maximum rate of 15% to individuals and other noncorporate taxpayers. If shares of an Underlying Fund are purchased within 30 days before or after redeeming at a loss other shares of that Underlying Fund (whether pursuant to a rebalancing of an Asset Allocation Fund's portfolio or otherwise), all or a part of the loss will not be deductible by an Asset Allocation Fund and instead will increase its basis for the newly purchased shares.
Although an Underlying Fund will be eligible to elect to "pass-through" to its shareholders (including an Asset Allocation Fund) the benefit of the foreign tax credit if more than 50% in the value of its total assets at the close of any taxable year consists of securities of foreign corporations, an Asset Allocation Fund will not qualify to pass that benefit through to its shareholders because of its inability to satisfy the asset test. Accordingly, an Asset Allocation Fund will deduct the amount of any foreign taxes passed through by an Underlying Fund in determining its investment company taxable income.
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 forward foreign currency exchange contracts, options and futures contracts that certain of the Funds may enter into will be subject to special tax treatment as "Section 1256 contracts."
Section 1256 contracts that a Fund holds are treated as if they are sold for their fair market value on the last business day of the taxable year, regardless of whether a taxpayer's obligations (or rights) under such contracts have terminated (by delivery, exercise, entering into a closing transaction or otherwise) as of such date. Any gain or loss recognized as a consequence of the year-end deemed disposition of Section 1256 contracts is combined with any other gain or loss that was previously recognized upon the termination of Section 1256 contracts during that taxable year. The net amount of such gain or loss for the entire taxable year (including gain or loss arising as a consequence of the year-end deemed sale of such contracts) is deemed to be 60% long-term and 40% short-term gain or loss. However, in the case of Section 1256 contracts that are forward foreign currency exchange contracts, the net gain or loss is separately determined and (as discussed above) generally treated as ordinary income or loss. If such a future or option is held as an offsetting position and can be considered a straddle under Section 1092 of the Code, such a straddle will constitute a mixed straddle. A mixed straddle will be subject to both Section 1256 and Section 1092 unless certain elections are made by the Fund.
Other hedging transactions in which the Funds may engage may result in "straddles" or "conversion transactions" for U.S. federal income tax purposes. The straddle and conversion transaction rules may affect the character of gains (or in the case of the straddle rules, losses) realized by the Funds. In addition, losses realized by the Funds on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in calculating the taxable income for the taxable year in which the losses are realized. Because only a few regulations implementing the straddle rules and the conversion transaction rules have been promulgated, the tax consequences to the Funds of hedging transactions are not entirely clear. The hedging transactions may increase the amount of short-term capital gain realized by the Funds (and, if they are conversion transactions, the amount of ordinary income) which is taxed as ordinary income when distributed to shareholders.
Because application of any of the foregoing rules governing Section 1256 contracts, constructive sales, straddle and conversion transactions may affect the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected investment or straddle positions, the taxable income of a Fund may exceed 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.
SWAP AGREEMENTS AND CREDIT DEFAULT AGREEMENTS. Each Fund may enter into swap agreements and may also enter into credit default swap agreements as permitted by each Fund's prospectus. The rules governing the tax aspects of certain types of these 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 certain types of swap agreements and credit default swap agreements.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise tax is imposed on a regulated investment company that fails to distribute in each calendar year an amount equal to 98% of ordinary taxable income for the calendar year and 98% of capital gain net income (excess of capital gains over capital losses) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year (a "taxable year election")). The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a regulated investment company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 (or
after the end
of its taxable year if it has made a taxable year election) in determining the amount of ordinary taxable income for the current calendar year (and, instead, include such gains and losses in determining ordinary taxable income for the succeeding calendar year).
Each Fund generally intends to make sufficient distributions or deemed distributions of its ordinary taxable income and capital gain net income prior to the end of each calendar year to avoid liability for the excise tax. However, in the event that the Internal Revenue Service determines that a Fund is using an improper method of allocation for purposes of equalization accounting (as discussed above), such Fund may be liable for excise tax. Moreover, investors should note that a Fund may in certain circumstances be required to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. In addition, under certain circumstances, a Fund may elect to pay a minimal amount of excise tax.
PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity securities and thus may invest in stocks of foreign companies that are classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income.
The application of the PFIC rules may affect, among other things, the character of gain, the amount of gain or loss and the timing of the recognition 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.
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 and to the extent that shareholders have held their fund shares for a minimum required period.
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 ex-dividend date.
Ordinarily, shareholders are required to take distributions by a Fund into account in the year in which the distributions are made. However, dividends declared in October, November or December of any year and payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders (and made by the Fund) on December 31 of such calendar year if such dividends are actually paid in January of the following year. Shareholders will be advised annually as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year in accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost as a result of a distribution by a Fund, such distribution generally will be taxable even though it represents a return of invested capital. Investors should be careful to consider the tax implications of buying shares of a Fund just prior to a distribution. The price of shares purchased at this time may reflect the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a distribution which generally will be taxable to them.
SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on the sale or redemption of shares of a Fund in an amount equal to the difference between the proceeds of the sale or redemption and the shareholder's adjusted tax basis in the shares. All or a portion of any loss so recognized may be deferred 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 and short-term capital gain and of certain types of interest income) 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.
As a consequence of the enactment of the American Jobs Creation Act of 2004, such a foreign shareholder will also generally be exempt from U.S. federal income tax on distributions that a Fund designates as "short-term capital gain dividends" or as "interest-related dividends" for Fund taxable years beginning after December 31, 2004 and before January 1, 2008. The aggregate amount that may be designated as short-term capital gain dividends for a Fund's taxable year is equal to the excess (if any) of the Fund's net short-term capital gain (including short-term capital gain dividends received from another regulated investment company) over its net long-term capital loss. The aggregate amount designated as interest-related dividends for any Fund taxable year is generally limited to the excess of the amount of "qualified interest income" of the Fund over allocable expenses. Qualified interest income is generally equal to the sum of a Fund's U.S.-source income that constitutes (1) bank deposit interest; (2) short-term original issue discount that is exempt from withholding tax; (3) interest on a debt obligation which is in registered form, unless it is earned on a debt obligation issued by a corporation or partnership in which the Fund holds a 10-percent ownership interest or its payment is contingent on certain events; and (4) interest-related dividends received from another regulated investment company. An Asset Allocation Fund may designate distributions out of short-term capital gain dividends and interest-related dividends received from an Underlying Fund as short-term capital gain dividends and interest-related dividends paid to its own shareholders.
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, short-term capital gain dividends, interest-related 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 the Foreign Tax Election, 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. Estates of decedents dying after December 31, 2004 and before January 1, 2008 will be able to exempt from federal estate tax the proportion of the value of a Fund's shares attributable to "qualifying assets" held by the Fund at the end of the quarter immediately preceding the decedent's death (or such other time as the Internal Revenue Service may designate in regulations). Qualifying assets include bank deposits and other debt obligations that pay interest or accrue original issue discount that is exempt from withholding tax, debt obligations of a domestic corporation that are treated as giving rise to foreign source income, and other investments that are not treated for tax purposes as being within the United States. Shareholders will be advised annually of the portion of a Fund's assets that constituted qualifying assets at the end of each quarter of its taxable year.
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 October 31, 2005. 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, Class R shares and Investor Class 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.
INVESTOR
FUND CLASS A CLASS B CLASS C CLASS R CLASS
---- ------- ------- ------- ------- --------
AIM Basic Value Fund 0.25% 1.00% 1.00% 0.50% N/A
AIM Conservative Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Global Equity Fund 0.25 1.00 1.00 0.50 N/A
AIM Growth Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Income Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM International Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Mid Cap Core Equity Fund 0.25 1.00 1.00 0.50 N/A
AIM Moderate Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Moderate Growth Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Moderately Conservative Allocation Fund 0.25 1.00 1.00 0.50 N/A
AIM Small Cap Growth Fund 0.25 1.00 1.00 0.50 0.25%
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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 Class A, Class B, Class C and Class R 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 allocated share of expenses AIM Distributors may incur in fulfilling its obligations under these Plans. Thus, even if AIM Distributors' actual allocated share of expenses exceeds the fee payable to AIM Distributors at any given time, under these Plans, the Funds will not be obligated to pay more than that fee. If AIM Distributors' actual allocated share of expenses is less than the fee it receives, under these Plans, 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 or Class R shares attributable to the customers of selected dealers and financial institutions to such dealers and financial institutions, including AIM Distributors, acting as principal, who furnish continuing personal shareholder services to their customers who purchase and own the applicable class of shares of the Fund. Under the terms of a shareholder service agreement, such personal shareholder services include responding to customer inquiries and providing customers with information about their investments. Any amounts not paid as a service fee under each Plan would constitute an asset-based sales charge.
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 L for a list of the amounts paid by each class of shares of each Fund to AIM Distributors pursuant to the Plans for the year, or period, ended December 31, 2004 and Appendix M for an estimate by category of the allocation of actual fees paid by each class of shares of each Fund pursuant to its respective distribution plan for the year or period ended December 31, 2004.
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 to curb sharp fluctuations in rates of redemptions and sales, thereby reducing the chance that an unanticipated increase in net redemptions could adversely affect the performance of each Fund.
Unless terminated earlier in accordance with their terms, the Plans continue from year to year as long as such continuance is specifically approved, in person, at least annually by the Board, including a majority of the Rule 12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution expenses paid by the applicable class requires shareholder approval; otherwise, the Plans may be amended by the trustees, including a majority of the Rule 12b-1 Trustees, by votes cast in person at a meeting called for the purpose of voting upon such amendment. As long as the Plans are in effect, the selection or nomination of the Independent Trustees is committed to the discretion of the Independent Trustees.
The Class B Plan obligates Class B shares to continue to make payments to AIM Distributors following termination of the Class B shares Distribution Agreement with respect to Class B shares sold by or attributable to the distribution efforts of AIM Distributors or its predecessors, unless there has been a complete termination of the Class B Plan (as defined in such Plan) and the Class B Plan expressly authorizes AIM Distributors to assign, transfer or pledge its rights to payments pursuant to the Class B Plan.
DISTRIBUTOR
The Trust has entered into master distribution agreements, as amended, relating to the Funds (the "Distribution Agreements") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreements provide AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis directly and through other broker-dealers with whom AIM Distributors has entered into selected dealer agreements. AIM Distributors has not undertaken to sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own resources to dealers and institutions who sell Class B, Class C and Class R shares of the Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the purchase price of the Class B shares sold by the dealer or institution, and will consist of a sales commission equal to 3.75% of the purchase price of the Class B shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. The portion of the payments to AIM Distributors under the Class B Plan which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of such sales commissions plus financing costs. In the future, if multiple distributors serve a Fund, each such distributor (or its assignee or transferee) would receive a share of the payments under the Class B Plan based on the portion of the Fund's Class B shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions who sell Class C shares of the AIM Funds at the time of such sales. Payments with respect to Class C shares will equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution, and will consist of a sales commission of 0.75% of the purchase price of the Class C shares sold plus an advance of the first year service fee of 0.25% with respect to such shares. AIM Distributors will retain all payments received by it relating to Class C shares for the first year after they are purchased. The portion of the payments to AIM Distributors under the Class A, Class C and Class R Plan attributable to Class C shares which constitutes an asset-based sales charge (0.75%) is intended in part to permit AIM Distributors to recoup a portion of the sales commissions to dealers plus financing costs, if any. After the first full year, AIM Distributors will make quarterly payments to dealers and institutions based on the average net asset value of Class C shares which are attributable to shareholders for whom the dealers and institutions are designated as dealers of record. These payments will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.
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 December 31 are found in Appendix N.
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 June 30, 2005 are found in Appendix O.
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 June 30, 2005 are found in Appendix O.
Calculation of Certain Performance Data
AIM Basic Value Fund, AIM Global Equity Fund, AIM Mid Cap Core Equity Fund and AIM Small Cap Growth Fund may use a restated or blended performance calculation to derive certain performance data shown for their Class R shares in this Statement of Additional Information and in each Fund's advertisements and other sales material. If a 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 such 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 a 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 such Fund's Class R shares since their inception and the restated historical performance of such Fund's Class A shares (for periods prior to the inception of such Fund's Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R shares. If a 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.
AIM Small Cap Growth Fund may use a restated or blended performance calculation to derive certain performance data shown for its Investor Class shares in this Statement of Additional Information and in the Fund's advertisements and other sales material. If a Fund's Investor 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 Fund's Class A shares at net asset value, which restated performance will reflect the higher Rule 12b-1 fees applicable to Class A shares. If a Fund's Investor 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 Fund's Investor Class shares since their inception and the restated historical performance of the Fund's Class A shares (for periods prior to the inception of the Fund's Investor Class shares) at net asset value, which restated performance will reflect the higher Rule 12b-1 fees applicable to Class A shares. If a Fund's Investor Class 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 Investor 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 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
D the beginning of the one, five or ten year periods
(or since inception, if applicable) at the end of the
one, five or ten year periods (or since inception, if
applicable), after taxes on fund distributions but
not after taxes on redemption.
|
Standardized average annual total return (after taxes on distributions) for: (1) Class A shares reflects the deduction of a Fund's maximum front-end sales charge at the time of purchase; and (2) Class B and Class C shares reflect the deduction of the maximum applicable CDSC on a redemption of shares held for the period.
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 June 30, 2005 are found in Appendix O.
Average Annual Total Return (After Taxes on Distributions and Sale of Fund Shares) Quotation
A Fund's average annual total return (after taxes on distributions and sale of Fund shares) shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. It reflects the deduction of federal income taxes on both distributions and proceeds. Average annual total returns (after taxes on distributions and redemption) are calculated by determining the after-tax growth or decline in value of a hypothetical investment in a Fund
over a stated period of time, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. Because average annual total returns (after taxes on distributions and redemption) tend to even out variations in the Fund's return, investors should recognize that such returns are not the same as actual year-by-year results. To illustrate the components of overall performance, a Fund may separate its average annual total returns (after taxes on distributions and redemption) into income results and capital gains or losses.
The standard formula for calculating average annual total return (after taxes on distributions and redemption) is:
n
P(1+T) = ATV
DR
Where P = a hypothetical initial payment of $1,000;
T = average annual total return (after taxes on
distributions and redemption);
n = number of years; and
ATV = ending value of a hypothetical $1,000 payment made at
DR the beginning of the one, five or ten year periods
(or since inception, if applicable) at the end of the
one, five or ten year periods (or since inception, if
applicable), after taxes on fund distributions and
redemption.
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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 reflect 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 June 30, 2005 are found in Appendix O.
Performance Information
All advertisements of the Funds will disclose the maximum sales charge (including deferred sales charges) imposed on purchases of a Fund's shares. If any advertised performance data does not reflect the maximum sales charge (if any), such advertisement will disclose that the sales charge has not been deducted in computing the performance data, and that, if reflected, the maximum sales charge would reduce the performance quoted. Further information regarding each Fund's performance is contained in that Fund's annual report to shareholders, which is available upon request and without charge.
From time to time, AIM or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results are not necessarily indicative of future results.
Total return and yield figures for the Funds are neither fixed nor guaranteed. The Funds may provide performance information in reports, sales literature and advertisements. The Funds may also, from time to time, quote information about the Funds published or aired by publications or other media entities which contain articles or segments relating to investment results or other data about one or more of the Funds. The following is a list of such publications or media entities:
Advertising Age Forbes Pension World Barron's Fortune Pensions & Investments Best's Review Hartford Courant Personal Investor Broker World Inc. Philadelphia Inquirer Bloomberg Institutional Investor The Bond Buyer Business Week Insurance Forum USA Today Changing Times Insurance Week U.S. News & World Report Christian Science Monitor Investor's Business Daily Wall Street Journal Consumer Reports Journal of the American Washington Post Economist Society of CLU & ChFC CNN FACS of the Week Kiplinger Letter CNBC Financial Planning Money PBS Financial Product News Mutual Fund Forecaster Financial Services Week Nation's Business Financial World New York Times |
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 Stanger FactSet Data Systems Weisenberger Lipper, Inc. |
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the following:
Lipper Global Fund Index MSCI World Index
Lipper Large-Cap Value Fund Index Russell 1000--Registered Trademark--
Value Index
Lipper Multi-Cap Value Fund Index Russell 2000--Registered Trademark--
Growth Index
Lipper Mid-Cap Core Fund Index Russell Midcap--Registered Trademark--
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Index Lipper Small-Cap Growth Fund Index Standard & Poor's 500 Stock Index
Each Fund may also compare its performance to rates on Certificates of Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
90 day Treasury Bills
Advertising for the Funds may from time to time include discussions of general economic conditions and interest rates. Advertising for such Funds may also include references to the use of those Funds as part of an individual's overall retirement investment program. From time to time, sales literature and/or advertisements for any of the Funds may disclose: (i) the largest holdings in the Funds' portfolios; (ii) certain selling group members; (iii) certain institutional shareholders; (iv) measurements of risk, including standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector analyses of holdings in the Funds' portfolios.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, discussions regarding investment styles, such as the growth, value or GARP (growth at a reasonable price) styles of investing, variable annuities, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
PENDING LITIGATION
Regulatory Action Alleging Market Timing
On April 12, 2005, the Attorney General of the State of West Virginia
("WVAG") filed a civil lawsuit against AIM, INVESCO Funds Group, Inc. ("IFG")
(the former investment advisor to certain AIM Funds) and ADI, as well as
numerous unrelated mutual fund complexes and financial institutions. None of the
AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint,
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection
Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties;
a writ of quo warranto against the defendants; pre-judgment and post-judgment
interest; costs and expenses, including counsel fees; and other relief.
If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could affect the ability of AIM or any other investment advisor directly or indirectly owned by AMVESCAP PLC ("AMVESCAP"), from serving as an investment advisor to any registered investment company, including your Fund. Your Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as your Fund's investment advisor. There is not assurance that such exemptive relief will be granted.
On May 31, 2005, the defendants removed this lawsuit to the U.S. District Court for the Northern District of West Virginia at Wheeling. On June 13, 2005, the MDL Court (as defined below) issued a Conditional Transfer Order transferring this lawsuit to the MDL Court. On June 29, 2005 the WVAG filed a Notice of Opposition to this Conditional Transfer Order. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
On August 30, 2005, the West Virginia Office of the State Auditor -- Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes findings of fact that essentially mirror the WVAG's allegations mentioned above and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. AIM and ADI have the right to challenge this action, which they intend to do.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of September 20, 2005 is set forth in Appendix P-1.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings, with one exception. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. A list identifying the amended complaints in the MDL Court is included in Appendix P-1. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. These lawsuits are identified in Appendix P-1.
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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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, AIM, the AIM Funds
or related entities, or for which service of process has been waived, as of
September 20, 2005 is set forth in Appendix P-2.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of September 20, 2005 is set forth in Appendix P-3.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) alleging that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM 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 Federal 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of September 20, 2005 is set forth in Appendix P-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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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, AIM, the AIM Funds or related entities, or for which service of process has been waived, as of September 20, 2005 is set forth in Appendix P-5.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
A civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, A I M Capital Management, Inc. ("AIM Capital") and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate. This lawsuit alleges as theories of recovery: (i) violation of various provisions of the Federal securities laws; (ii) common law breach of fiduciary duty; and (iii) common law negligence. This lawsuit has been filed in Federal court and seeks such remedies as compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs;
and costs and attorneys' fees. Such lawsuit, which was dismissed by the Court on August 12, 2005, is set forth in Appendix P-6.
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
EXAMPLES OF PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF OCTOBER 7, 2005)
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel
Foley & Lardner LLP Legal Counsel (for certain AIM Funds)
Kramer, Levin Naftalis & Frankel LLP Legal Counsel
PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm
Brown Brothers Harriman & Co. Securities Lender (for certain AIM Funds)
MS Securities Services, Inc. Securities Lender (for certain AIM Funds)
Morgan Stanley & Co. Securities Lender (for certain AIM Funds)
Fitch, Inc. Rating & Ranking Agency (for certain AIM
Funds)
iMoneyNet Ranking Agency (for certain AIM funds)
Lipper Inc. Rating & Ranking Agency (for certain AIM
Funds)
Moody's Investors Service Rating & Ranking Agency (for certain AIM
Funds)
Institutional Shareholder Services, Inc. Proxy Voting Service
State Street Bank and Trust Company Custodian (for certain AIM Funds), Software
Provider, Securities Lender (for certain AIM
Funds), Line of Credit Provider (for certain
AIM Funds)
The Bank of New York Custodian (for certain AIM Funds)
JP Morgan Securities Inc. Line of Credit Provider (for certain AIM
Funds)
Citigroup Global Markets Inc. Line of Credit Provider (for certain AIM
Funds)
JPMorgan Chase Bank Line of Credit Provider (for certain AIM
Funds)
AIM Investment Services, Inc. Transfer Agent
Bloomberg System Provider (for certain AIM Funds)
Reuters America Inc. Pricing Service (for certain AIM Funds)
The MacGregor Group, Inc. Software Provider
Thomson Financial, Inc. Software Provider
Xcitek Solutions Plus Software Provider
Bowne & Co., Inc. Financial Printer
CENVEO Financial Printer
Classic Printers Inc. Financial Printer
Color Dynamics Financial Printer
Earth Color Houston Financial Printer
EMCO Press Financial Printer
Grover Printing Financial Printer
Gulfstream Graphics Corp. Financial Printer
|
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
Signature Financial Printer
Southwest Precision Printers, Inc. Financial Printer
ABN Amro Financial Services, Inc. Broker (for certain AIM Funds)
BB&T Capital Markets Broker (for certain AIM Funds)
Belle Haven Investments L.P. Broker (for certain AIM Funds)
BOSC, Inc. Broker (for certain AIM Funds)
Cabrera Capital Markets Broker (for certain AIM Funds)
Coastal Securities, LP Broker (for certain AIM Funds)
Duncan-Williams, Inc. Broker (for certain AIM Funds)
Fidelity Investments Broker (for certain AIM Funds)
First Albany Capital Broker (for certain AIM Funds)
First Tryon Securities Broker (for certain AIM Funds)
Anglemyer & Co. Analyst (for certain AIM Funds)
Empirical Research Partners Analyst (for certain AIM Funds)
Factset Research Systems, Inc. Analyst (for certain AIM Funds)
Global Trend Alert Analyst (for certain AIM Funds)
J.P. Morgan Chase Analyst (for certain AIM Funds)
Kevin Dann & Partners Analyst (for certain AIM Funds)
Muzea Insider Consulting Services, LLC Analyst (for certain AIM Funds)
Noah Financial, LLC Analyst (for certain AIM Funds)
Piper Jaffray Analyst (for certain AIM Funds)
RBC Capital Markets Analyst (for certain AIM Funds)
|
APPENDIX C
TRUSTEES AND OFFICERS
As of October 31, 2005
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 109 portfolios in the AIM 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 predecessor entities, if any.
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE TRUST AND/OR TRUSTEESHIP(S) HELD
OFFICER BY TRUSTEE
SINCE
-------------------------------- ----------- ------------------------------------------------- ---------------------
INTERESTED PERSONS
Robert H. Graham(1) --1946 1998 Director and Chairman, A I M Management Group None
Trustee, Vice Chair, President Inc. (financial services holding company);
and Principal Executive Officer Director and Vice Chairman, AMVESCAP PLC and
Chairman, 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 None
Trustee and Executive Vice Officer, A I M Management Group Inc. (financial
President services holding company); Director 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),
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; and Chairman, A
I M Advisors, Inc.
|
(1) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust.
(2) Mr. Williamson is considered an interested person of the Trust because he is an officer and a director of the advisor to, and a director of the principal underwriter of, the Trust.
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE TRUST AND/OR TRUSTEESHIP(S) HELD
OFFICER BY TRUSTEE
SINCE
-------------------------------- ----------- ------------------------------------------------- ---------------------
INDEPENDENT TRUSTEES
Bruce L. Crockett -- 1944 2001 Chairman, Crockett Technology Associates ACE Limited
Trustee and Chair (technology consulting company) (insurance
company); and
Captaris, Inc.
(unified messaging
provider)
Bob R. Baker - 1936 2003 Retired None
Trustee
Frank S. Bayley -- 1939 1985 Retired Badgley Funds, Inc.
Trustee (registered
Formerly: Partner, law firm of Baker & McKenzie investment company
(2 portfolios))
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
Albert R. Dowden -- 1941 2001 Director of a number of public and private None
Trustee business corporations, including the Boss Group,
Ltd. (private investment and management);
Cortland Trust, Inc. (Chairman) (registered
investment company) (3 portfolios); Annuity and
Life Re (Holdings), Ltd. (insurance company);
and CompuDyne Corporation (provider of products
and services to the public security market)
Formerly: Director, President and Chief
Executive Officer, Volvo Group North America,
Inc.; Senior Vice President, AB Volvo; and
director of various affiliated Volvo companies
Edward K. Dunn, Jr. -- 1935 2001 Retired None
Trustee
|
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE TRUST AND/OR TRUSTEESHIP(S) HELD
OFFICER BY TRUSTEE
SINCE
-------------------------------- ----------- ------------------------------------------------- ---------------------
Jack M. Fields -- 1952 2001 Chief Executive Officer, Twenty First Century Administaff ; and
Trustee Group, Inc. (government affairs company); and Discovery Global
Owner, Dos Angelos Ranch, L.P. Education Fund
(non-profit)
Formerly: Chief Executive Officer, Texana
Timber LP (sustainable forestry company)
Carl Frischling -- 1937 2001 Partner, law firm of Kramer Levin Naftalis and Cortland Trust,
Trustee Frankel LLP Inc. (registered
investment company
(3 portfolios))
Gerald J. Lewis -- 1933 2003 Chairman, Lawsuit Resolution Services (San General Chemical
Trustee Diego, California) Group, Inc.,
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 1977 Retired None
Trustee
Larry Soll -- 1942 2003 Retired None
Trustee
Raymond Stickel, Jr. -- 1944 2005 Retired None
Trustee Formerly: Partner, Deloitte & Touche
|
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE TRUST AND/OR TRUSTEESHIP(S) HELD
OFFICER BY TRUSTEE
SINCE
-------------------------------- ----------- ------------------------------------------------- ---------------------
OTHER OFFICERS
Lisa O. Brinkley -- 1959 2004 Senior Vice President, A I M Management Group N/A
Senior Vice President and Inc. (financial services holding company);
Chief Compliance Officer Senior Vice President and Chief Compliance
Officer, A I M Advisors, Inc.; Vice President
and Chief Compliance Officer, A I M Capital
Management, Inc.; and Vice President, A I M
Distributors, Inc., AIM Investment Services,
Inc. and Fund Management Company
Formerly: Senior Vice President and Compliance
Director, Delaware Investments Family of Funds;
and Chief Compliance Officer, A I M
Distributors, Inc.
Russell C. Burk -- 1958 2005 Formerly: Director of Compliance and Assistant N/A
Senior Vice President and General Counsel, ICON Advisers, Inc.; Financial
Senior Officer Consultant, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
Kevin M. Carome -- 1956 2003 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief Legal General Counsel, A I M Management Group Inc.
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., AIM Investment
Services, Inc. and Fund Management Company; and
Senior Vice President, A I M Distributors, Inc.
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.; and
Senior Vice President and General Counsel,
Liberty Funds Group, LLC; and Vice President,
A I M Distributors, Inc.; and Director and General
Counsel, Fund Management Company
Sidney M. Dilgren -- 1961 2004 Vice President and Fund Treasurer, A I M N/A
Vice President, Treasurer Advisors, Inc.
and Principal Financial Officer
Formerly: Senior Vice President, AIM Investment
Services, Inc. and Vice President, A I M
Distributors, Inc.
|
NAME, YEAR OF BIRTH AND TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS OTHER
POSITION(S) HELD WITH THE TRUST AND/OR TRUSTEESHIP(S) HELD
OFFICER BY TRUSTEE
SINCE
-------------------------------- ----------- ------------------------------------------------- ---------------------
J. Philip Ferguson -- 1945 2005 Senior Vice President and Chief Investment N/A
Vice President Officer, A I M Advisors, Inc.; Director,
Chairman, Chief Executive Officer, President and
Chief Investment Officer, A I M Capital
Management, Inc.; Executive Vice President, A I M
Management Group Inc.
Formerly: Senior Vice President, AIM Private
Asset Management, Inc.; Chief Equity Officer,
and Senior Investment Officer, A I M Capital
Management, Inc.; and Managing Partner, Beutel,
Goodman Capital Management
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.
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2004
--------------------------- -------------------------------------------------- -------------------------------------
NAME OF TRUSTEE DOLLAR RANGE OF EQUITY SECURITIES AGGREGATE DOLLAR RANGE OF EQUITY
PER FUND SECURITIES IN ALL REGISTERED
INVESTMENT COMPANIES OVERSEEN BY
TRUSTEE IN THE AIM FAMILY OF
Funds--Registered Trademark--
--------------------------- -------------------------------------------------- -------------------------------------
Robert H. Graham Basic Value Over $100,000 Over $100,000
Mid Cap Core Equity Over $100,000
Small Cap Growth Over $100,000
Bob R. Baker - $0 - Over $100,000
Frank S. Bayley - $0 - Over $100,000
James T. Bunch - $0 - Over $100,0003
Bruce L. Crockett - $0 - Over $100,000(3)
Albert R. Dowden Basic Value $10,001 - $50,000 Over $100,000
Mid Cap Core Equity $50,001 - $100,000
Edward K. Dunn, Jr. Basic Value $10,001 - $50,000 Over $100,000(3)
Jack M. Fields - $0 - Over $100,000(3)
Carl Frischling Aggressive Allocation $10,001 - $50,000 Over $100,000(3)
Conservative Allocation $10,001 - $50,000
Global Equity Over $100,000
Mid Cap Core Equity Over $100,000
Moderate Allocation $10,001 - $50,000
Gerald J. Lewis - $0 - Over $100,000(3)
Prema Mathai-Davis - $0 - Over $100,000(3)
Lewis F. Pennock Basic Value $1 - $10,000 Over $100,000
Global Equity $1 - $10,000
Mid Cap Core Equity $1 - $10,000
Ruth H. Quigley Global Equity $1 - $10,000 $10,001 - $50,000
Larry Soll - $0 - Over $100,000(3)
Raymond Stickel, Jr.(4) - $0 - - $0 -
Mark H. Williamson Global Equity Over $100,000 Over $100,000
|
(4) Mr. Stickel was elected as a trustee of the Trust effective October 1, 2005.
APPENDIX D
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, 2004:
ESTIMATED ANNUAL
AGGREGATE RETIREMENT BENEFITS UPON TOTAL
COMPENSATION FROM BENEFITS RETIREMENT FROM COMPENSATION
THE ACCRUED ALL AIM FUNDS(4) FROM ALL AIM
TRUSTEE TRUST(1)(2) BY ALL AIM FUNDS(5)(6)
FUNDS(3)
------------------------------------ ------------------- ---------------- ------------------- -------------------
Bob R. Baker $ 14,855 $ 198,871 $ 144,786 $ 189,750
Frank S. Bayley 14,983 175,241 112,500 193,500
James T. Bunch 14,539 143,455 112,500 186,000
Bruce L. Crockett 17,512 75,638 112,500 223,500
Albert R. Dowden 14,902 93,210 112,500 192,500
Edward K. Dunn, Jr. 14,983 133,390 112,500 193,500
Jack M. Fields 14,351 48,070 112,500 186,000
Carl Frischling(7) 14,290 62,040 112,500 185,000
Gerald J. Lewis 14,539 143,455 112,500 186,000
Prema Mathai-Davis 14,667 55,768 112,500 189,750
Lewis F. Pennock 14,350 80,777 112,500 186,000
Ruth H. Quigley 14,667 154,767 112,500 189,750
Louis S. Sklar(8) 14,351 115,160 101,250 186,000
Larry Soll 14,539 184,356 130,823 186,000
Raymond Stickel, Jr.(9) N/A N/A - 0 - N/A
|
(1) Amounts shown are based on the fiscal year ended December 31, 2004. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended December 31, 2004, including earnings, was $47,527.
(2) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Aggregate Compensation From the Trust" above does not include $2,978 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the fiscal year ended December 31, 2004.
(3) During the fiscal year ended December 31, 2004, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $195,224.
(4) These amounts represent the estimated annual benefits payable by the AIM Funds upon the trustee's retirement and assumes each trustee serves until his or her normal retirement date.
(5) All trustees currently serve as trustees of 19 registered investment companies advised by AIM.
(6) At the request of the trustees, AMVESCAP has agreed to reimburse the Trust for Fund expenses related to market timing matters. "Total Compensation From All AIM Funds" above does not include $44,000 of trustee compensation which, pursuant to such agreement, was reimbursed by AMVESCAP during the calendar year ended December 31, 2004.
(7) During the fiscal year ended December 31, 2004, the Trust paid $41,855 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.
(8) Mr. Sklar retired effective December 31, 2004.
(9) Mr. Stickel was elected as trustee of the Trust effective October 1, 2005.
>
APPENDIX E
PROXY POLICIES AND PROCEDURES
(as amended October 1, 2005)
A. PROXY POLICIES
Each of A I M Advisors, Inc., A I M Capital Management, Inc. and AIM Private Asset Management, 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. The key board committees (e.g., Audit, Compensation and Nominating) should be composed of only independent trustees. There are some actions by directors that should result in votes being withheld. These instances include directors who:
o 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;
o Attend less than 75 percent of the board and committee meetings without a valid excuse;
o It is not clear that the director will be able to fulfill his function;
o Implement or renew a dead-hand or modified dead-hand poison pill;
o Enacted egregious corporate governance or other policies or failed to replace management as appropriate;
o Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or
o 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:
o Long-term financial performance of the target company relative to its industry;
o Management's track record;
o Portfolio manager's assessment;
o Qualifications of director nominees (both slates);
o Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and
o Background to the proxy contest.
II. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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:
o It is not clear that the auditors will be able to fulfill their function;
o 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
o 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.
o We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.
o 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.
o 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.
o We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.
o 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.
o 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.
o 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.
o 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.
o 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.
o We will generally abstain from shareholder social and environmental proposals.
o We will generally support the board's discretion regarding shareholder proposals that involve ordinary business practices.
o 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.
o We will generally vote for proposals to lower barriers to shareholder action.
o 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
o We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.
o We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.
o 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. Committee members may also speak to management of a company regarding proxy issues and should share relevant considerations with the proxy committee. 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 e-mail.
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. The proxy committee shall prepare a report for the Funds' Board of Trustees on a periodic basis regarding issues where AIM's votes do not follow the recommendation of ISS or another provider because AIM's proxy policies differ from those of such 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 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, even if such subcommittee does not constitute a quorum 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.
If AIM's proxy policies and voting record do not guide the proxy committee's vote in a situation where a conflict of interest exists, the proxy committee will vote the proxy in the best interest of the advisory clients, and will provide information regarding the issue to the Funds' Board of Trustees in the next quarterly report.
If 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.
F. FUND OF FUNDS
When an AIM Fund (an "Investing Fund") that invests in another AIM Fund(s) (an "Underlying Fund") has the right to vote on the proxy of the Underlying Fund, the Investing Fund will echo the votes of the other shareholders of the Underlying AIM Fund.
G. CONFLICT IN THESE POLICIES
If following any of the policies listed herein would lead to a vote that the proxy committee deems to be not in the best interest of AIM's advisory clients, the proxy committee will vote the proxy in the manner that they deem to be the best interest of AIM's advisory clients and will inform the Funds' Board of Trustees of such vote and the circumstances surrounding it promptly thereafter.
APPENDIX F
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 October 11, 2005.
AIM BASIC VALUE FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
AMVESCAP National Trust Company
FBO AMVESCAP 401(k) Plan -- -- -- -- 12.80%
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust Company
FBO AMVESCAP Money Purchase Plan -- -- -- -- 6.65%
PO Box 105779
Atlanta, GA 30348-5779
Citigroup Global Markets
House Account
Attn: Cindy Tempesta -- -- 5.69% -- --
333 West 34th St.,
7th Floor
New York, NY 10001-2402
FIIOC Agent
Employee Benefit Plans -- -- -- -- 35.48%
100 Magellan Way KW1C
Covington, KY 41015-1987
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
First Command Bank Trust
Attn: Trust Department -- -- -- -- 37.70%
P.O. Box 901075
Fort Worth, TX 76101-2075
The Guardian Insurance & Annuity
Company Inc.
Separate Acct L -- -- -- 6.28% --
Attn: Equity Acctg 3518
3900 Burgess Place
Bethlehem, PA 18017-9097
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers 5.34% 8.90% 17.49% -- --
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246-6484
Relistar Insurance Co of New York
151 Farmington Ave, #TN41 -- -- -- 5.10% --
Hartford, CT 06156-0001
Symetra Investment Services Inc.
PO Box 34443 -- -- -- 6.06% --
Seattle, WA 98124-1443
|
AIM CONSERVATIVE ALLOCATION FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Abdite Industries Inc
Oliver J. Laszlo -- -- -- 16.78% --
18370 Outer Dr
Dearborn, MI 48128-1353
A I M Advisors, Inc.(1)
ATTN: Corporate Controller -- -- -- -- 100.00%
11 E. Greenway Plz Ste 1919
Houston, TX 77046-1103
AMVESCAP Natl Trustco TTEE
FBO Frost FBO B&O Management Co
Discretionary Contribution Pl -- -- -- 5.54% --
PO Box 105779
Atlanta, GA 30348-5779
ANTCSCAP Natl Trustco TTEE
FBO Frost Natl Bank
FBO Super S Foods Employees PS -- -- -- 23.44% --
PL & Trust
PO Box 105779
Atlanta, GA 30348-5779
MG Trust Co Cust
See All Industries Inc
401(k) PS -- -- -- 5.17% --
700 17th St, Ste 300
Denver, CO 80202-3531
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Michael P. Orourke and
Kimberly A. Schenk
Trst Sharon A. Orourke Living -- -- 6.17% -- --
Trust Dtd 8/25/95
3435 Golden Ave Apt 903
Cincinnati, OH 45226-2026
Oppenheimer & Co Inc Cust FBO
Charles N Kostelnik IRA R/O -- -- -- 12.88% --
8274 Mills St
Taylor, MI 48180-2015
|
AIM GLOBAL EQUITY FUND
CLASS A CLASS B CLASS C INSTITUTIONAL
SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- -------------
AMVESCAP Natl Trustco TTEE FBO
XL America Inc Retplan -- -- -- 25.43%
PO Box 105799
Atlanta, GA 30348-5799
Citigroup Global Market
House Account
Attn: Cindy Tempesta 5.45% 7.29% 9.07% --
333 West 34th St.,
7th Floor
New York, NY 10001-2402
Charles Schwab & Co Inc
Reinvestment Account 8.33% -- -- --
101 Montgomery St
San Francisco, CA 94104-4122
|
CLASS A CLASS B CLASS C INSTITUTIONAL
SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- -------------
First Command Bank Trust
ATTN: Trust Department -- -- -- 74.32%
PO Box 901075
Fort Worth, TX 76101-2075
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers -- 5.85% 13.93% --
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246
Morgan Stanley DW
ATTN: Mutual Fund Operations -- -- 6.18% --
3 Harborside Pl FL 6
Jersey City, NJ 07311-3907
|
AIM GROWTH ALLOCATION FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
A I M Advisors, Inc.(1)
ATTN: Corporate Controller -- -- -- -- 100.00%
11 E. Greenway Plz Ste 1919
Houston, TX 77046-1103
AMVESCAP Natl Trustco TTEE FBO
Seaspecialities Inc
401K Savings Pl -- -- -- 45.97% --
PO Box 105779
Atlanta, GA 30348-5779
|
(1) Owned of record and beneficially.
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
ANTCSCAP Natl Trustco TTEE FBO
Frost Natl Bank FBO Super S
Foods Employees PS PL & Trust -- -- -- 11.39% --
PO Box 105779
Atlanta, GA 30348-5779
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers -- -- 10.89% -- --
ATTN: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
MG Trust Co Cust
Brothers Co Inc 401k PS -- -- -- 5.21% --
700 17th St,, Ste 300
Denver, CO 80202-3531
|
AIM MID CAP CORE EQUITY FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Citigroup Global Market
House Account
Attn: Cindy Tempesta -- -- 6.33% -- --
333 West 34th St.,
7th Floor
New York, NY 10001-2402
FIIOC Agent
Employee Benefit Plans
100 Magellan Way KW1C -- -- -- -- 24.85%
Covington, KY 41015-1987
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
John Hancock Life
Insurance Co USA
250 Bloor St East 7th Floor 11.50% -- -- -- --
Toronto On M4W 1E5
Canada
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of 5.65% 6.38% 18.63% 5.02% --
Customers
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246
Morgan Stanley DW
ATTN: Mutual Fund Operations -- -- 5.42% -- --
3 Harborside PL FL 6
Jersey City, NJ 07311-3907
NAP & Co Trust Co Nominee
7650 Magna Dr -- -- -- -- 8.69%
Belleville, IL 62223-3366
The Northern Trust Co.
FBO Northern Trust Tip-DV -- -- -- -- 23.70%
P.O. Box 92994
Chicago, IL 60675-2994
State Street Bank Custodian
FBO Hatfield Profit
Sharing Fund -- -- -- -- 9.53%
ATTN: Douglas Martin
1776 Heritage Dr
North Quincy, MA 02171-2119
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Wells Fargo Bank NA
FBO 401K -- Mid Cap Core -- -- -- -- 18.09%
P.O. Box 1533
Minneapolis, MN 55480-1533
|
AIM MODERATE ALLOCATION FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
A I M Advisors, Inc.(1)
ATTN: Corporate Controller -- -- -- -- 83.77%
11 E. Greenway Plz Ste 1919
Houston, TX 77046-1103
AMVESCAP National TR Co TTEE
FBO The McDevitt Co Employees
401K Plan -- -- -- 5.18% --
PO Box 105779
Atlanta, GA 30348-5779
ANTSCAP Natl Trustco TTEE FBO
Frost Natl Bank FBO Super S
Foods Employees PS PL & Trust -- -- -- 13.77% --
PO Box 105779
Atlanta, GA 30348-5779
AMVESCAP Natl Trustco TTEE FBO
Smrt Inc 401k PS PL -- -- -- 21.83% --
PO Box 105779
Atlanta, GA 30348-5779
|
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers -- -- 8.15% -- --
ATTN: Fund Administration
4800 Deer Lake Dr East
2nd Floor
Jacksonville, FL 32246-6484
Raymond James & Assoc Inc
FBO Warthen IRA -- -- -- -- 16.23%
880 Carillon Pkwy
St. Petersburg, FL 33716-1100
|
AIM MODERATE GROWTH ALLOCATION FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
AIM Advisors Inc(1)
ATTN: Corporate Controller -- -- -- 39.73% 100.00%
11 E. Greenway Plz, Ste. 1919
Houston, TX 77046-1103
AMVESCAP National Trust Company
Crossroads Fellowship
N. Doug Gamble -- -- -- 5.08% --
1405 Falls Church Rd
Raleigh, NC 27609-4015
Andrea L. Pergament
37 Holly Rd -- -- -- 9.56% --
Waban, MA 02468-1411
|
(1) Owned of record and beneficially.
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
Carpet Specialists Ltd
Brenda Helen Browne
11632 Fairgrove Inc Blvd -- -- -- 5.89% --
Maryland Heights, MO 63043
Carpet Specialists Ltd
Lisa C.Hrebec
11632 Fairgrove Inc Blvd -- -- -- 6.39% --
Maryland Heights, MO 63043
Pershing LLC
P.O. Box 2052 5.49% -- -- -- --
Jersey City, NJ 07303-2052
Southern Tier Lift
Patrick B. Hall -- -- -- 15.44% --
620 Castle Creek Rd
Binghamton, NY 13901-5109
|
AIM MODERATELY CONSERVATIVE ALLOCATION FUND
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
AIM Advisors, Inc.(1)
ATTN: Corporate Controller -- -- -- 78.38% 100.00%
11 E. Greenway Plz, Ste 1919
Houston, TX 77046-1103
AMVESCAP National Trust Company
Conroe ISD
James D. Luton -- -- 5.52% -- --
601 Oak Ridge Rd
Willis, TX 77378-2721
|
(1) Owned of record and beneficially.
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL
SHARES SHARES SHARES SHARES CLASS SHARES
---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- -------------
AMVESCAP National Trust Company
McAllen ISD
Maria P. Garza -- -- -- 12.75% --
709 N. 7th St.
McAllen, TX 78501-2607
AMVESCAP National Trust Company
Shenendehowa Central Schools -- -- 9.42% -- --
Ronald W. Jacobs
137 Benson St.
Albany, NY 12206-2122
ANTC Cust IRA FBO
Douglas Hague -- -- 6.49 -- --
11049 Seaport Ln
Boca Raton, FL 33428-1242
OMNI Fasteners
Ronald J. Kuczmarski
909 Towpath Rd -- 6.30% -- -- --
Broadview Heights, OH
44147-3676
William L. Detzel and Judy F.
Detzel TTEES Detzel TR
DTD 07/23/2001 -- -- 7.46% -- --
6348 Taylor Mill Rd
Covington, KY 41015-2458
Wells Fargo Investments LLC
ACCT 6019-7594
625 Marquette Ave S. -- -- 5.06% -- --
13th Floor
Minneapolis, MN 55402-2308
|
AIM SMALL CAP GROWTH FUND
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS INSTITUTIONAL
SHARES SHARES SHARES SHARES SHARES(2) CLASS SHARES
---------- ---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ---------- -------------
American United Life Group
Retirement Annuity -- -- -- 8.79% N/A --
PO Box 398
Indianapolis, IN 46206-0398
AMVESCAP Natl Trust Co FBO
AMVESCAP 401(k) Plan -- -- -- -- N/A 24.64%
P.O. Box 105779
Atlanta, GA 30348-5779
AMVESCAP National Trust
Company FBO AMVESCAP Money
Purchase Plan -- -- -- -- N/A 10.35%
P.O. Box 105779
Atlanta, GA 30348-5779
Fidelity Investments
Institutional Operations
Co. (F110C) as Agent for -- -- -- -- N/A 29.59%
Certain Employee Benefit Plans
100 Magellan Way
Mail Location -- KW1C
Covington, KY 41015-1999
HUBCO
Regions Financial Corp -- -- -- -- N/A 8.84%
PO Box 830688
Birmingham, AL 35283-0688
John Hancock Life
Insurance Company
(U.S.A) 14.35% -- -- -- N/A --
250 Bloor St East
7th Floor
Toronto, ON M4W 1E5
Canada
|
(2) Investor Class shares commenced operations on December 14, 2005.
INVESTOR
CLASS A CLASS B CLASS C CLASS R CLASS INSTITUTIONAL
SHARES SHARES SHARES SHARES SHARES(2) CLASS SHARES
---------- ---------- ---------- ---------- ---------- -------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
NAME AND ADDRESS OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF OWNED OF
PRINCIPAL HOLDER RECORD RECORD RECORD RECORD RECORD RECORD
------------------- ---------- ---------- ---------- ---------- ---------- -------------
Merrill Lynch Pierce
Fenner & Smith
FBO The Sole Benefit of
Customers 8.49% 8.86% 20.77% 8.50% N/A 17.63%
Attn: Fund Administration
4800 Deer Lake Dr East,
2nd Floor
Jacksonville, FL 32246
Relistar Insurance Co
of New York -- -- -- 7.99% N/A --
151 Farmington Aven # TN41
Hartford, CT 06156-0001
|
AIM INCOME ALLOCATION FUND AND AIM INTERNATIONAL ALLOCATION FUND
AIM provided the initial capitalization of each Fund and, accordingly, as of the date of this Statement of Additional Information, owned more than 25% of the issued and outstanding shares of each Fund and therefore could be deemed to "control" each Fund as that term is defined in the 1940 Act. It is anticipated that after the commencement of the public offering of each Fund's shares, AIM will cease to control each Fund for the purposes of the 1940 Act.
MANAGEMENT OWNERSHIP
As of October 11, 2005, the trustees and officers as a group owned less than 1% of the shares outstanding of each class of any Fund.
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
FUND NAME 2004 2003 2002
------------------------------------ ------------------------------------ -----------------------------------
NET NET NET
MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT MANAGEMENT
FEE FEE FEE FEE FEE FEE FEE FEE FEE
PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
AIM Basic
Value Fund $45,729,287 $531,221 $45,198,066 $34,395,027 $84,222 $34,310,805 $31,679,859 $39,803 $31,640,056
AIM Global
Equity Fund $ 2,103,152 $ 2,638 $ 2,100,514 $ 1,398,793 $72,356 $ 1,326,437 $ 1,448,177 $79,200 $ 1,368,977
AIM Mid Cap
Core Equity
Fund $22,980,408 $108,680 $22,871,728 $15,648,450 $78,152 $15,570,298 $ 9,735,227 $42,589 $ 9,692,638
AIM Small
Cap Growth
Fund $13,134,333 $ 26,987 $13,107,346 $ 9,914,438 $29,940 $ 9,884,498 $ 7,192,423 $23,725 $ 7,168,698
|
APPENDIX H
PORTFOLIO MANAGERS
As of December 31, 2004
INVESTMENTS IN EACH FUND
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
------------------------- -----------------------------------------
AIM BASIC VALUE FUND
R. Canon Coleman II $500,001 -- $1,000,000
Matthew W. Seinsheimer $100,001 -- $500,000
Michael J. Simon $500,001 -- $1,000,000
Bret W. Stanley Over $1,000,000
AIM CONSERVATIVE ALLOCATION FUND
Gary K. Wendler None
AIM GLOBAL EQUITY FUND
Derek S. Izuel $10,001 -- $50,000
Duy Nguyen(2) $1 -- $10,000
AIM GROWTH ALLOCATION FUND
Gary K. Wendler None
AIM INCOME ALLOCATION FUND(3)
Gary K. Wendler N/A
AIM INTERNATIONAL ALLOCATION FUND(3)
Gary K. Wendler N/A
AIM MID CAP CORE EQUITY FUND
Ronald S. Sloan $500,001 -- $1,000,000
AIM MODERATE ALLOCATION FUND
Gary K. Wendler None
AIM MODERATE GROWTH ALLOCATION FUND(4)
Gary K. Wendler None
|
(1) This column reflects investments in a Fund's shares owned directly by a portfolio manager or beneficially owned by a portfolio manager (as determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended). A portfolio manager is presumed to be a beneficial owner of securities that are held by his or her immediate family members sharing the shame household.
(2) Mr. Nguyen began serving as portfolio manager on September 30, 2005. Ownership information has been provided as of August 31, 2005.
(3) Commenced operations on October 31, 2005.
(4) Commenced operations on April 29, 2005.
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
------------------------- -----------------------------------------
AIM MODERATELY CONSERVATIVE ALLOCATION FUND(4)
Gary K. Wendler None
AIM SMALL CAP GROWTH FUND
Juliet S. Ellis $10,001 -- $50,000
Juan R. Hartsfield $10,001 -- $50,000
|
DESCRIPTION OF COMPENSATION STRUCTURE
AIM ADVISORS, INC.
AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements:
o BASE SALARY. Each portfolio manager is paid a base salary. In setting the base salary, AIM's intention is to be competitive in light of the particular portfolio manager's experience and responsibilities.
o ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and non-quantitative components. Generally, 70% of the bonus is quantitatively determined, based typically on a four-year rolling average of pre-tax performance of all registered investment company accounts for which a portfolio manager has day-to-day management responsibilities versus the performance of a pre-determined peer group. In instances where a portfolio manager has responsibility for management of more than one fund, an asset weighted four-year rolling average is used.
High fund performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided compensation survey information) and poor fund performance (versus applicable peer group) could result in no bonus. The amount of fund assets under management typically have an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance. The remaining 30% portion of the bonus is discretionary as determined by AIM and takes into account other subjective factors.
o EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent.
o PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes.
o PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords employees the tax benefits of deferring the receipt of a portion of their cash compensation.
Portfolio managers also participate in benefits plans and programs available generally to all employees.
DESCRIPTION OF COMPENSATION STRUCTURE (GARY WENDLER)
AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Mr. Wendler receives a base salary, an incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Mr. Wendler's compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Mr. Wendler's compensation consists of the following five elements:
o BASE SALARY. Mr. Wendler is paid a base salary. In setting the base salary, AIM's intention is to be competitive in light of Mr. Wendler's experience and responsibilities.
o ANNUAL BONUS. Mr. Wendler is eligible to receive an annual cash bonus. Generally, a portion of the bonus is determined based on the appropriateness of the funds chosen for the portfolio. With a goal of maximizing the efficiency of the portfolio based on the risk/reward profile of the intended shareholder of the fund. However, the total performance of these funds carries less weight in terms of the bonus than Mr. Wendler's other responsibilities not associated with the portfolio.
Fund performances (against applicable peer group) would be a driver of compensation, poor fund performance (versus applicable peer group) could result in a smaller bonus. The amount of fund assets under management typically has an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance.
o EQUITY-BASED COMPENSATION. Mr. Wendler may be awarded options to purchase common shares and/or granted restricted shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent.
o PARTICIPATION IN GROUP INSURANCE PROGRAMS. Mr. Wendler is provided life insurance coverage in the form of a group variable universal life insurance policy, under which he may make additional contributions to purchase additional insurance coverage or for investment purposes.
o PARTICIPATION IN DEFERRED COMPENSATION PLAN. Mr. Wendler is eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation.
Mr. Wendler also participates in benefit plans and programs available generally to all employees.
OTHER MANAGED ACCOUNTS
As of December 31, 2004
AIM's portfolio managers develop investment models which are used in connection with the management of certain AIM funds as well as other mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals. The following chart reflects information regarding accounts other than the Fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) mutual funds, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance ("performance-based fees"), information on those accounts is specifically broken out.
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
----------------------------------------------------------------------------------------------------------------------
AIM BASIC VALUE FUND
R. Canon Coleman II 8 Registered Mutual Funds with $3,792,755,077 in total assets under management
1 Unregistered Pooled Investment Vehicle with $8,108,039 in total assets
under management
3596 Other Accounts with $1,078,482,755 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
Matthew W. Seinsheimer 8 Registered Mutual Funds with $3,792,755,077 in total assets under management
1 Unregistered Pooled Investment Vehicle with $8,108,039 in total assets
under management
3596 Other Accounts with $1,078,482,755 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
Michael J. Simon 12 Registered Mutual Funds with $5,127,006,106 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $8,108,039 in total assets
under management
3596 Other Accounts with $1,078,482,755 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
|
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
----------------------------------------------------------------------------------------------------------------------
Bret W. Stanley 11 Registered Mutual Funds with $14,632,389,656 in total assets under
management
1 Unregistered Pooled Investment Vehicle with $8,108,039 in total assets
under management
3596 Other Accounts with $1,078,482,755 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
AIM CONSERVATIVE ALLOCATION FUND
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler 2 Registered Mutual Funds with $220,561,264 in total assets under management
----------------------------------------------------------------------------------------------------------------------
AIM GLOBAL EQUITY FUND
----------------------------------------------------------------------------------------------------------------------
Derek S. Izuel 4 Unregistered Pooled Investment Vehicles with $922,755,643 in total assets
under management
----------------------------------------------------------------------------------------------------------------------
Duy Nguyen(6) 1 Registered Mutual Fund with $401,822,576 in total assets under management
----------------------------------------------------------------------------------------------------------------------
AIM GROWTH ALLOCATION FUND
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler 2 Registered Mutual Funds with $189,905,729 in total assets under management
----------------------------------------------------------------------------------------------------------------------
AIM INCOME ALLOCATION FUND(7)
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler None
----------------------------------------------------------------------------------------------------------------------
AIM INTERNATIONAL ALLOCATION FUND(7)
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler None
----------------------------------------------------------------------------------------------------------------------
AIM MID CAP CORE EQUITY FUND
----------------------------------------------------------------------------------------------------------------------
Ronald S. Sloan 9 Registered Mutual Funds with $13,962,561,095 in total assets under
management
2 Unregistered Pooled Investment Vehicles with $55,285,105 in total assets
under management
8796 Other Accounts with $1,925,777,183 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
AIM MODERATE ALLOCATION FUND
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler 2 Registered Mutual Funds with $118,237,659 in total assets under management
----------------------------------------------------------------------------------------------------------------------
|
(6) Mr. Nguyen began serving as portfolio manager on AIM Global Equity Fund on September 30, 2005. Information on other accounts he manages has been provided as of August 31, 2005.
(7) Commenced operations on October 31, 2005.
NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND
NAME OF PORTFOLIO MANAGER TOTAL ASSETS BY CATEGORY
----------------------------------------------------------------------------------------------------------------------
AIM MODERATE GROWTH ALLOCATION FUND(8)
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler None
----------------------------------------------------------------------------------------------------------------------
AIM MODERATELY CONSERVATIVE ALLOCATION FUND(8)
----------------------------------------------------------------------------------------------------------------------
Gary K. Wendler None
----------------------------------------------------------------------------------------------------------------------
AIM SMALL CAP GROWTH FUND
----------------------------------------------------------------------------------------------------------------------
Juliet S. Ellis 5 Registered Mutual Funds with $1,416,009,463 in total assets under management
1 Other Account with $124,542 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
Juan R. Hartsfield 5 Registered Mutual Funds with $1,416,009,463 in total assets under management
1 Other Account with $124,542 in total assets under management(5)
----------------------------------------------------------------------------------------------------------------------
|
POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and/or other accounts may be presented with one or more of the following potential conflicts:
o The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. AIM seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio manager's focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds.
o If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, AIM and the Funds have adopted procedures for allocating portfolio transactions across multiple accounts.
o With respect to securities transactions for the Funds, AIM determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), AIM may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a Fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market
(8) Commenced operations on April 29, 2005.
price of the security or the execution of the transaction, or both, to the possible detriment of the Fund or other account(s) involved.
o Finally, the appearance of a conflict of interest may arise where AIM has an incentive, such as a performance-based management fee, which relates to the management of one Fund or account but not all Funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities.
AIM and the Funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal years ended December 31:
FUND NAME 2004 2003 2002
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Basic Value Fund $697,597 $645,285 $486,863
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Conservative
Allocation Fund(1) $33,470 N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Global Equity Fund $50,000 $50,000 $50,000
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Growth Allocation Fund(1) $33,470 N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Income Allocation Fund(2) N/A N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM International
Allocation Fund(2) N/A N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Mid Cap Core Equity
Fund $592,602 $487,969 $274,931
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Moderate Allocation
Fund(1) $33,470 N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Moderate Growth
Allocation Fund(3) N/A N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Moderately
Conservative Allocation
Fund(3) N/A N/A N/A
---------------------------- ------------------------------ ------------------------------- --------------------------
AIM Small Cap Growth Fund $437,687 $365,048 $206,896
---------------------------- ------------------------------ ------------------------------- --------------------------
|
(1) Commenced operations on April 30, 2004.
(2) Commenced operations on October 31, 2005.
(3) Commenced operations on April 29, 2005.
APPENDIX J
BROKERAGE COMMISSIONS
Brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years ended December 31 were as follows:
FUND 2004 2003 2002
----------------------------------------------- ---------- ---------- ----------
AIM Basic Value Fund(3) $2,061,261 $4,078,941 $7,413,401
AIM Conservative Allocation Fund(2) 0 N/A N/A
AIM Global Equity Fund(4) 466,738 851,859 435,419
AIM Growth Allocation Fund(2) 0 N/A N/A
AIM Income Allocation Fund(5) N/A N/A N/A
AIM International Allocation Fund(5) N/A N/A N/A
AIM Mid Cap Core Equity Fund 4,624,704 3,392,660 2,957,059
AIM Moderate Allocation Fund(2) 0 N/A N/A
AIM Moderate Growth Allocation Fund(6) N/A N/A N/A
AIM Moderately Conservative Allocation Fund(6) N/A N/A N/A
AIM Small Cap Growth Fund(7) 4,324,262 2,705,367 1,470,812
|
(1) Disclosure regarding brokerage commissions is limited to commissions paid on agency trades and designated as such on the trade confirm.
(2) Commenced operations on April 30, 2004.
(3) The variation in brokerage commissions paid by AIM Basic Value Fund for the fiscal years ended December 31, 2004 and 2003, was due to lower portfolio activity in 2004, based on the attractive investment opportunities the portfolio management team believed were represented in the fund throughout the year.
(4) The variation in brokerage commissions paid by AIM Global Equity Fund for the fiscal year ended December 31, 2004 as compared to the prior fiscal year ended December 31, 2003 was due to the variation in brokerage commissions paid by AIM Global Equity Fund for the fiscal years ended December 31, 2004 and 2003, was largely due to lower portfolio activity in 2004. The management team makes trades based on its assessment of the risk/return tradeoff in the marketplace, so any variation in portfolio activity from one year to the next is a function of this assessment.
(5) Commenced operations on October 31, 2005.
(6) Commenced operations on April 29, 2005.
(7) The variation in brokerage commissions paid by AIM Small Cap Growth Fund for the fiscal years ended December 31, 2004 and 2003, as compared to the prior fiscal year, was due to an increase in transactions executed with commissions as a result of the realignment of the Fund's portfolio to fit the investment process of the current management team that assumed management of the Fund in September of 2004.
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2004, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Fund Transactions(1) Brokerage Commissions(1)
----------------------------------------------------- ----------------- ------------------------
AIM Basic Value Fund $1,242,510,780.79 $3,387,080.82
AIM Conservative Allocation Fund(2) 0 0
AIM Global Equity Fund $414,043,484.95 $350,106.33
AIM Growth Allocation Fund(2) 0 0
AIM Income Allocation Fund(2,3) N/A N/A
AIM International Allocation Fund(2,3) N/A N/A
AIM Mid Cap Core Equity Fund $2,319,519,878.23 $3,470,282.87
AIM Moderate Allocation Fund(2) 0 0
AIM Moderate Growth Allocation Fund(2,4) N/A N/A
AIM Moderately Conservative Allocation Fund(2,4) N/A N/A
AIM Small Cap Growth Fund $1,319,584,065.26 $4,721,675.64
|
During the last fiscal year ended December 31, 2004, the following Funds purchased securities by the following companies, which are "regular" brokers or dealers of one or more of the Funds identified below:
Market Value
Issuer Security (as of December 31, 2004)
------------------------------- ------------ -------------------------
AIM Basic Value Fund
J.P. Morgan Chase & Co. Common Stock $ 242,383,174
Merrill Lynch & Co., Inc. Common Stock 158,808,890
Morgan Stanley Common Stock 169,719,088
AIM Global Equity Fund
ABN AMRO Holding N.V. Common Stock $ 3,370,268
AIM Small Cap Growth Fund
Jefferies Group, Inc. Common Stock 9,727,620
Piper Jaffray Cos., Inc. Common Stock $ 7,269,220
|
(1) Amount is inclusive of commissions paid to, and brokerage transactions placed with, certain brokers that provide execution, research and other services.
(2) This fund is a fund of funds, and therefore does not allow transactions for research, statistics or other information. However, for such data for each of the underlying funds which comprise the subject fund of funds, please see the SAI of each underlying fund.
(3) Commenced operations on October 31, 2005.
(4) Commenced operations on April 29, 2005.
APPENDIX L
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS
A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plans for the fiscal year ended December 31, 2004 follows:
CLASS A CLASS B CLASS C CLASS R
FUND SHARES SHARES SHARES SHARES
------------------------------------------------------ ----------- ----------- ---------- --------
AIM Basic Value Fund $14,891,022 $19,569,452 $6,757,711 $104,692
AIM Conservative Allocation Fund 22,251 33,661 37,463 2,838
AIM Global Equity Fund 681,690 642,518 130,813 N/A2
AIM Growth Allocation Fund 35,636 63,305 33,885 1,704
AIM Income Allocation Fund(1) N/A N/A N/A N/A
AIM International Allocation Fund(1) N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 8,097,059 7,044,856 3,172,774 236,821
AIM Moderate Allocation Fund 68,484 124,720 92,170 2,377
AIM Moderate Growth Allocation Fund(2) N/A N/A N/A N/A
AIM Moderately Conservative Allocation Fund(2) N/A N/A N/A N/A
AIM Small Cap Growth Fund 5,494,140 1,619,722 442,711 70,406
|
(1) Commenced operations on October 31, 2005.
(2) Commenced operations on April 29, 2005.
As of the date of this Statement of Additional Information, the Investor Class shares of AIM Small Cap Growth Fund had not yet commenced operations.
APPENDIX M
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS
An estimate by category of the allocation of actual fees paid by Class A shares of the Funds during the fiscal year ended December 31, 2004 follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATING
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION TO MARKETING PERSONNEL
----------- ---------- -------- ------------ ------------ --------------- ------------
AIM Basic Value Fund $ 502,869 $ 51,897 $194,487 $ 0 $ 11,679,479 $ 107,492 $ 2,354,798
AIM Conservative Allocation Fund 917 82 182 0 17,437 0 3,633
AIM Global Equity Fund 18,408 1,704 5,324 0 571,665 2,958 81,631
AIM Growth Allocation Fund 1,457 144 229 0 28,086 0 5,720
AIM Income Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM International Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 37,376 3,845 13,777 0 5,877,379 7,586 173,585
AIM Moderate Allocation Fund 2,642 252 499 0 54,009 200 10,882
AIM Moderate Growth Allocation Fund(2) N/A N/A N/A N/A N/A N/A N/A
AIM Moderately Conservative N/A N/A N/A N/A N/A N/A N/A
Allocation Fund(2)
AIM Small Cap Growth Fund 0 0 0 0 3,924,386 0 0
|
An estimate by category of the allocation of actual fees paid by Class B shares of the Funds during the fiscal year ended December 31, 2004 follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATING
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION TO MARKETING PERSONNEL
----------- ---------- -------- ------------ ------------ --------------- ------------
AIM Basic Value Fund $ 44,718 $ 4,571 $ 16,617 $ 14,677,089 $ 4,610,064 $ 9,149 $ 207,244
AIM Conservative Allocation Fund 300 0 150 25,246 6,162 0 1,803
AIM Global Equity Fund 1,562 170 473 481,889 151,963 158 6,303
AIM Growth Allocation Fund 691 54 149 47,479 11,951 0 2,981
AIM Income Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM International Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 27,421 2,837 10,086 5,283,642 1,589,121 5,673 126,075
AIM Moderate Allocation Fund 1,276 111 154 93,540 23,785 0 5,854
AIM Moderate Growth Allocation Fund(2) N/A N/A N/A N/A N/A N/A N/A
AIM Moderately Conservative N/A N/A N/A N/A N/A N/A N/A
Allocation Fund(2)
AIM Small Cap Growth Fund 2,078 205 888 1,214,791 390,983 380 10,397
|
(1) Commenced operations on October 31, 2005.
(2) Commenced operations on April 29, 2005.
An estimate by category of the allocation of actual fees paid by Class C shares of the Funds during the fiscal year ended December 31, 2004 follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATING
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION TO MARKETING PERSONNEL
----------- ---------- -------- ------------ ------------ --------------- ------------
AIM Basic Value Fund $ 32,949 $ 3,402 $ 12,505 $ 801,748 $ 5,744,257 $ 7,270 $ 155,580
AIM Conservative Allocation Fund 307 0 154 9,220 25,784 0 1,998
AIM Global Equity Fund 1,215 120 668 35,069 86,393 0 7,348
AIM Growth Allocation Fund 572 57 158 15,592 14,198 0 3,308
AIM Income Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM International Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 29,096 3,123 11,400 697,393 2,290,995 6,939 133,828
AIM Moderate Allocation Fund 1,367 106 294 30,030 53,896 0 6,477
AIM Moderate Growth Allocation Fund(2) N/A N/A N/A N/A N/A N/A N/A
AIM Moderately Conservative N/A N/A N/A N/A N/A N/A N/A
Allocation Fund(2)
AIM Small Cap Growth Fund 1,373 177 423 26,624 408,902 141 5,071
|
An estimate by category of the allocation of actual fees paid by Class R shares of the Funds during the fiscal year ended December 31, 2004 follows:
PRINTING & UNDERWRITERS DEALERS TRAVEL RELATING
ADVERTISING MAILING SEMINARS COMPENSATION COMPENSATION TO MARKETING PERSONNEL
----------- ---------- -------- ------------ ------------ --------------- ------------
AIM Basic Value Fund $ 2,032 $ 209 $ 766 $ 27,816 $ 63,942 $ 303 $ 9,624
AIM Conservative Allocation Fund 93 9 26 1,414 886 2 408
AIM Global Equity Fund N/A N/A N/A N/A N/A N/A N/A
AIM Growth Allocation Fund(2) 72 7 4 831 513 3 274
AIM Income Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM International Allocation Fund(1) N/A N/A N/A N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 5,333 537 1,903 64,470 139,461 1,056 24,061
AIM Moderate Allocation Fund 111 10 1 1,185 641 5 424
AIM Moderate Growth Allocation Fund(2) N/A N/A N/A N/A N/A N/A N/A
AIM Moderately Conservative
Allocation Fund(2) N/A N/A N/A N/A N/A N/A N/A
AIM Small Cap Growth Fund 1,487 146 451 18,100 43,539 251 6,432
|
(1) Commenced operations on October 31, 2005.
(2) Commenced operations on April 29, 2005.
As of the date of this Statement of Additional Information, the Investor Class shares of AIM Small Cap Growth Fund had not yet commenced operations.
APPENDIX N
TOTAL SALES CHARGES
The following chart reflects the total sales charges paid in connection with the sale of Class A shares of each Fund and the amount retained by AIM Distributors for the last three fiscal years ending December 31:
2004 2003 2002
SALES AMOUNT AMOUNT SALES AMOUNT
CHARGES RETAINED SALES CHARGES RETAINED CHARGES RETAINED
------------ ------------- ------------- ------------- ------------ -------------
AIM Basic Value Fund $ 5,381,3011 $ 868,069 $ 5,004,113 $ 759,942 $ 9,981,981 $ 1,521,182
AIM Conservative Allocation
Fund(1) 352,399 59,963 N/A N/A N/A N/A
AIM Global Equity Fund 337,797 62,651 158,159 28,656 94,201 16,958
AIM Growth Allocation Fund(1) 586,285 97,170 N/A N/A N/A N/A
AIM Income Allocation Fund(2) N/A N/A N/A N/A N/A N/A
AIM International Allocation
Fund(2) N/A N/A N/A N/A N/A N/A
AIM Mid Cap Core Equity Fund 2,088,488 342,343 4,684,623 701,330 5,400,197 804,255
AIM Moderate Allocation Fund(1) 1,256,804 203,518 N/A N/A N/A N/A
AIM Moderate Growth Allocation
Fund(3) N/A N/A N/A N/A N/A N/A
AIM Moderately Conservative
Allocation Fund (3) N/A N/A N/A N/A N/A N/A
AIM Small Cap Growth Fund 239,932 41,724 334,139 52,197 1,310,416 198,431
|
The following chart reflects the contingent deferred sales charges paid by Class A, Class B, Class C and Class R shareholders and retained by AIM Distributors for the last three fiscal years ended December 31:
2004 2003 2002
AIM Basic Value Fund $ 357,488 $ 117,667 $ 235,808
AIM Conservative Allocation Fund(1) 8,521 N/A N/A
AIM Global Equity Fund 12,946 336 1,906
AIM Growth Allocation Fund(1) 4,475 N/A N/A
AIM Income Allocation Fund(2) N/A N/A N/A
AIM International Allocation Fund(2) N/A N/A N/A
AIM Mid Cap Core Equity Fund 135,158 54,978 72,938
AIM Moderate Allocation Fund(1) 7,550 N/A N/A
AIM Moderate Growth Allocation Fund(3) N/A N/A N/A
AIM Moderately Conservative Allocation Fund(3) N/A N/A N/A
AIM Small Cap Growth Fund 24,656 26,238 53,881
|
(1) Commenced operations on April 30, 2004.
(2) Commenced operations on October 31, 2005.
(3) Commenced operations on April 29, 2005.
APPENDIX O
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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.61% 4.65% N/A 11.95% 10/18/95
AIM Conservative Allocation Fund -1.59% N/A N/A -0.48% 04/30/04
AIM Global Equity Fund 8.24% 3.17% N/A 7.86% 09/15/97
AIM Growth Allocation Fund 3.76% N/A N/A 6.63% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 1.01% 5.70% 9.72% N/A 06/09/87
AIM Moderate Allocation Fund 2.83% N/A N/A 4.33% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A -0.56% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.64% 04/29/05
AIM Small Cap Growth Fund -0.71% -7.14% N/A 11.29% 10/18/95
|
The average annual total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.50% 4.83% N/A 12.01% 10/18/95
AIM Conservative Allocation Fund -1.54% N/A N/A 0.25% 04/30/04
AIM Global Equity Fund 7.92% 3.32% N/A 8.00% 09/15/97
AIM Growth Allocation Fund 3.97% N/A N/A 7.76% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 1.18% 5.86% 9.76% N/A 04/01/93
AIM Moderate Allocation Fund 2.98% N/A N/A 5.33% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 0.17% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.21% 04/29/05
AIM Small Cap Growth Fund -0.70% -7.14% N/A 11.30% 10/18/95
|
(1) Commenced operations on April 29, 2005. 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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund 3.50% 5.15% N/A 6.38% 05/03/99
AIM Conservative Allocation Fund 2.46% N/A N/A 3.67% 04/30/04
AIM Global Equity Fund 11.94% 3.64% N/A 8.76% 01/02/98
AIM Growth Allocation Fund 7.97% N/A N/A 11.14% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 5.12% 6.19% N/A 11.51% 05/03/99
AIM Moderate Allocation Fund 6.98% N/A N/A 8.72% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 4.07% 04/29/05
AIM Moderately Conservative N/A N/A N/A 1.89% 04/29/05
Allocation Fund(1)
AIM Small Cap Growth Fund 3.30% -6.78% N/A 6.59% 05/03/99
|
The average annual total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund(2) 4.99% 5.67% N/A 12.43% 10/18/95(2)
AIM Conservative Allocation Fund(1) 3.92% N/A N/A 4.14% 04/30/04
AIM Global Equity Fund(3) 13.46% 4.02% N/A 8.37% 09/15/97(3)
AIM Growth Allocation Fund 9.51% N/A N/A 11.70% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund(2) 6.64% 6.74% 10.17% N/A 06/09/87(2)
AIM Moderate Allocation Fund 8.52% N/A N/A 9.28% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 5.17% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A 2.99% 04/29/05
AIM Small Cap Growth Fund(2) 4.84% -6.28% N/A 11.74% 10/18/95(2)
|
(1) Commenced operations on April 29, 2005. Returns are cumulative.
(2) The return shown for the one year period is the historical performance of the Fund's Class R shares. The returns shown for other periods are the blended returns of the historical performance of the Funds' Class R shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to inception of the Class R shares) at net asset
value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R shares. The inception date shown in the table is that of the Funds' Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
(3) The returns shown for these periods are 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 Class R shares. The inception date shown in the table is that of the Fund's Class A shares. The inception date of the Fund's Class R shares is October 31, 2005.
The average annual total returns (after taxes on distributions and redemption) for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Small Cap Growth Fund(1) 6.18% 7.22% 9.58% N/A 08/07/89
|
(1) The return shown for these periods is the restated historical performance of AIM Small Cap Growth Fund's Class A shares at the net asset value, which restated performance will reflect the higher Rule 12b-1 fees applicable to Class A shares. The inception date shown in the table is that of AIM Small Cap Growth Fund's Class A shares. The inception date of the Funds' Investor Class shares is December 14, 2005. As of the date of this Statement of Additional Information, the Investor Class shares of AIM Small Cap Growth Fund had not yet commenced operations.
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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.61% 25.53% N/A 198.92% 10/18/95
AIM Conservative Allocation Fund -1.59% N/A N/A -0.56% 04/30/04
AIM Global Equity Fund 8.24% 16.88% N/A 80.26% 09/15/97
AIM Growth Allocation Fund 3.76% N/A N/A 7.78% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 1.01% 31.96% 152.83% N/A 06/09/87
AIM Moderate Allocation Fund 2.83 N/A N/A 5.07% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A -0.56% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.64% 04/29/05
AIM Small Cap Growth Fund -0.71% -30.94% N/A 182.38% 10/18/95
|
The cumulative total returns (including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.50% 26.57% N/A 200.53% 10/18/95
AIM Conservative Allocation Fund -1.54% N/A N/A 0.29% 04/30/04
AIM Global Equity Fund 7.92% 17.72% N/A 82.07% 09/15/97
AIM Growth Allocation Fund 3.97% N/A N/A 9.11% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 1.18% 32.96% 153.73% N/A 04/01/93
AIM Moderate Allocation Fund 2.98% N/A N/A 6.24% 04/30/04
AIM Moderate Growth Allocation
Fund(1) N/A N/A N/A 0.17% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.21% 04/29/05
AIM Small Cap Growth Fund -0.70% -30.94% N/A 182.42% 10/18/95
|
(1) Commenced operations on April 29, 2005. Returns are cumulative.
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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund 3.50% 28.57% N/A 46.34% 05/03/99
AIM Conservative Allocation Fund 2.46% N/A N/A 4.29% 04/30/04
AIM Global Equity Fund 11.94% 19.57% N/A 87.53% 01/02/98
AIM Growth Allocation Fund 7.97% N/A N/A 13.11% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 5.12% 35.01% N/A 95.57% 05/03/99
AIM Moderate Allocation Fund 6.98% N/A N/A 10.24% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 4.07% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A 1.89% 04/29/05
AIM Small Cap Growth Fund 3.30% -29.59% N/A 48.14% 05/03/99
|
The cumulative total returns (not including the 0.75% contingent deferred sales charge that may be imposed on a total redemption of retirement plan assets within the first year) for each Fund, with respect to its Class R shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS R SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund(2) 4.99% 31.76% N/A 211.68% 10/18/95(2)
AIM Conservative Allocation Fund(1) 3.92% N/A N/A 4.85% 04/30/04
AIM Global Equity Fund(3) 13.46% 21.79% N/A 87.06% 09/15/97(3)
AIM Growth Allocation Fund 9.51% N/A N/A 13.78% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund(2) 6.64% 38.55% 163.50% N/A 06/09/872
AIM Moderate Allocation Fund 8.52% N/A N/A 10.91% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 5.17% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A 2.99% 04/29/05
AIM Small Cap Growth Fund(2) 4.84% -27.69% N/A 193.66% 10/18/95(2)
|
(1) Commenced operations on April 29, 2005. Returns are cumulative.
(2) The return shown for the one year period is the historical performance of the Fund's Class R shares. The returns shown for other periods are the blended returns of the historical performance of the Funds' Class R shares since their inception and the restated historical performance of the Funds' Class A shares (for periods prior to inception of the Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1 fees applicable to Class R Shares. The inception date shown in the table is that of the funds' Class A shares. The inception date of the Funds' Class R shares is June 3, 2002.
(3) The returns shown for these periods are the restated historical performance of the Fund's Class A shares at net asset value, adjusted to reflect the higherRule 12b-1 fees applicable to Class R shares. The inception date shown in the table is that of the Fund's Class A shares. The inception date of the Fund's Class R shares is October 31, 2005.
The cumulative total returns for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
INVESTOR CLASS SHARES: SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Small Cap Growth Fund1 9.51% 9.28% 12.85% N/A 08/07/89
|
(1) The return shown for these periods is the restated historical performance of AIM Small Cap Growth Fund's Class A shares at the net asset value, which restated performance will reflect higher Rule 12b-1 fees applicable to Class A shares. The inception date shown in the table is for AIM Small Cap Growth Fund's Class A shares. The inception date of the Funds' Investor Class shares is December 14, 2005. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Small Cap Growth Fund had not yet commenced operations.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS)
The average annual total returns (after taxes on distributions and including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.61% 4.58% N/A 11.47% 10/18/95
AIM Conservative Allocation Fund -1.90% N/A N/A -0.75% 04/30/04
AIM Global Equity Fund 7.17% 2.20% N/A 6.65% 09/15/97
AIM Growth Allocation Fund 3.62% N/A N/A 6.50% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund -0.14% 4.47% 7.31% N/A 06/09/87
AIM Moderate Allocation Fund 2.54 N/A N/A 4.07% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A -0.56% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.64% 04/29/05
AIM Small Cap Growth Fund -0.71% -7.48% N/A 10.46% 10/18/95
|
The average annual total returns (after taxes on distributions and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class B shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.50% 4.76% N/A 11.54% 10/18/95
AIM Conservative Allocation Fund -1.80% N/A N/A 0.03% 04/30/04
AIM Global Equity Fund 6.76% 2.33% N/A 6.80% 09/15/97
AIM Growth Allocation Fund 3.88% N/A N/A 7.68% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund -0.16% 4.52% 7.28% N/A 04/01/93
AIM Moderate Allocation Fund(1) 2.74% N/A N/A 5.12% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 0.17% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -2.21% 04/29/05
AIM Small Cap Growth Fund -0.70% -7.50% N/A 10.45% 10/18/95
|
(1) Commenced operations on April 29, 2005. 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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund 3.50% 5.09% N/A 6.30% 05/03/99
AIM Conservative Allocation Fund 2.20% N/A N/A 3.44% 04/30/04
AIM Global Equity Fund 10.78% 2.66% N/A 7.75% 01/02/98
AIM Growth Allocation Fund 7.88% N/A N/A 11.06% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 3.78% 4.86% N/A 9.71% 05/03/99
AIM Moderate Allocation Fund 6.74% N/A N/A 8.51% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 4.07% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A 1.89% 04/29/05
AIM Small Cap Growth Fund 3.30% -7.13% N/A 6.13% 05/03/99
|
The average annual total returns (after taxes on distributions) for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Small Cap Growth Fund(1) 9.51% 7.46% 9.90% N/A 08/07/89
|
(1) The return shown for these periods is the restated historical performance of AIM Small Cap Growth Fund's Class A shares at the net asset value, which restated performance will reflect the higher Rule 12b-1 fees applicable to Class A shares. The inception date shown in the table is for AIM Small Cap Growth Fund's Class A shares. The inception date of the Fund's Investor Class shares is December 14, 2005. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Small Cap Growth Fund had not yet commenced operations.
AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)
The average annual total returns (after taxes on distributions and redemption and including sales loads) for each Fund, with respect to its Class A shares, for the one, five and ten year periods (or since inception if less that ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.40% 3.96% N/A 10.37% 10/18/95
AIM Conservative Allocation Fund -1.02% N/A N/A -0.56% 04/30/04
AIM Global Equity Fund 6.12% 2.15% N/A 6.18% 09/15/97
AIM Growth Allocation Fund 2.47% N/A N/A 5.58% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 1.76% 4.27% 6.95% N/A 06/09/87
AIM Moderate Allocation Fund 1.86% N/A N/A 3.54% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A -0.37% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -1.72% 04/29/05
AIM Small Cap Growth Fund -0.46% -6.08% N/A 9.52% 10/18/95
|
(1) Commenced operations on April 29, 2005. 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 June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS B SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund -0.33% 4.12% N/A 10.43% 10/18/95
AIM Conservative Allocation Fund -0.99% N/A N/A 0.09% 04/30/04
AIM Global Equity Fund 5.98% 2.27% N/A 6.32% 09/15/97
AIM Growth Allocation Fund 2.60% N/A N/A 6.56% 04/30/04
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 2.05% 4.37% 6.95% N/A 04/01/93
AIM Moderate Allocation Fund 1.95% N/A N/A 4.42% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 0.11% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A -1.44% 04/29/05
AIM Small Cap Growth Fund -0.46% -6.09% N/A 9.52% 10/18/95
|
The average annual total returns (after taxes on distributions and redemption and including maximum applicable contingent deferred sales charge) for each Fund, with respect to its Class C shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
CLASS C SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Basic Value Fund 2.27% 4.40% N/A 5.49% 05/03/99
AIM Conservative Allocation Fund 1.61% N/A N/A 2.99% 04/30/04
AIM Global Equity Fund 8.59% 2.56% N/A 7.16% 01/02/98
AIM Growth Allocation Fund 5.20% N/A N/A 9.44% 04/30/04
AIM Income Allocation Fund N/A N/A N/A N/A 10/31/05
AIM International Allocation Fund N/A N/A N/A N/A 10/31/05
AIM Mid Cap Core Equity Fund 4.61% 4.66% N/A 9.05% 05/03/99
AIM Moderate Allocation Fund 4.55% N/A N/A 7.30% 04/30/04
AIM Moderate Growth Allocation Fund(1) N/A N/A N/A 2.65% 04/29/05
AIM Moderately Conservative
Allocation Fund(1) N/A N/A N/A 1.23% 04/29/05
AIM Small Cap Growth Fund 2.14% -5.80% N/A 5.48% 05/02/99
|
(1) Commenced operations on April 29, 2005. Returns are cumulative.
The average annual total returns (after taxes on distributions and redemption) for the Fund, with respect to its Investor Class shares, for the one, five and ten year periods (or since inception if less than ten years) ended June 30, 2005 are as follows:
PERIODS ENDED
JUNE 30, 2005
SINCE INCEPTION
INVESTOR CLASS SHARES: 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
--------------------------------------- ------ ------- -------- --------- ---------
AIM Small Cap Growth Fund(1) 6.18% 7.22% 9.58% N/A 08/07/89
|
(1) The return shown for these periods is the restated historical performance of AIM Small Cap Growth Fund's Class A shares at the net asset value, which restated performance will reflect higher Rule 12b-1 fees applicable to Class A shares. The inception date shown in the table is for AIM Small Cap Growth Fund's Class A shares. The inception date of the Funds' Investor Class shares is December 14, 2005. As of the date of this Statement of Additional Information, the Investor Class Shares of AIM Small Cap Growth Fund had not yet commenced operations.
APPENDIX P-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 Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived as of September 20, 2005 (with the exception of the Sayegh lawsuit discussed below).
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.
ANNE G. PERENTESES (WIDOW) V. AIM INVESTMENTS, ET AL (INVESCO FUNDS
GROUP, INC.), in the District Court of Maryland for Baltimore County
(Case No. 080400228152005), filed on July 21, 2005. This claim alleges
financial losses, mental anguish and emotional distress as a result of
unlawful market timing and related activity by the defendants. The
plaintiff in this case is seeking damages and costs and expenses.
Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits
(with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc.
et al., and Mike Sayegh v. Janus Capital Corporation, et al.) consolidated their
claims for pre-trial purposes into three amended complaints against various AIM-
and IFG-related parties: (i) a Consolidated Amended Class Action Complaint
purportedly brought on behalf of shareholders of the AIM Funds (the Lepera
lawsuit discussed below); (ii) a Consolidated Amended Fund Derivative Complaint
purportedly brought on behalf of the AIM Funds and fund registrants (the
Essenmacher lawsuit discussed below); and (iii) an Amended Class Action
Complaint for Violations of the Employee Retirement Income Securities Act
("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k)
plan (the Calderon lawsuit discussed below). The plaintiffs in the Vonder Haar
and Sayegh lawsuits continue to seek remand of their lawsuits to state court.
Set forth below is detailed information about these three amended complaints.
RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS
MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM
STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND FUNDS, AIM
SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO DISTRIBUTORS, INC.,
AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY J. MILLER,
THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK
WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN
GOLDBERG, MICHAEL GRADY, CITIGROUP, INC., CITIGROUP GLOBAL MARKETS
HOLDINGS, INC., SALOMON SMITH BARNEY, INC., MORGAN STANLEY DW, ANNA
BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO. SECURITIES INC., SECURITY
TRUST COMPANY, N.A., GRANT D. SEEGER, JB OXFORD HOLDINGS, INC.,
NATIONAL CLEARING CORPORATION, JAMES G. LEWIS, KRAIG L. KIBBLE, JAMES
Y. LIN, BANK OF AMERICA CORPORATION, BANC OF AMERICA SECURITIES LLC,
THEODORE C. SIHPOL, III, BEAR STEARNS & CO., INC., BEAR STEARNS
SECURITIES CORP., CHARLES SCHWAB & CO., CREDIT SUISSE FIRST BOSTON
(USA) INC., PRUDENTIAL FINANCIAL, INC., PRUDENTIAL SECURITIES, INC.,
CANADIAN IMPERIAL BANK OF COMMERCE, JP MORGAN CHASE AND CO., AND JOHN
DOE DEFENDANTS 1-100, in the MDL Court (Case No. 04-MD-15864; No.
04-CV-00814-JFM) (originally in the United States District Court for
the District of Colorado), filed on September 29, 2004. This lawsuit
alleges violations of Sections 11, 12(a) (2), and 15 of the Securities
Act; Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder; Section 20(a) of the Exchange Act; Sections 34(b), 36(a),
36(b) and 48(a) of the Investment Company Act; breach of fiduciary
duty/constructive fraud; aiding and abetting breach of fiduciary duty;
and unjust enrichment. The plaintiffs in this lawsuit are seeking:
compensatory damages, including interest; and other costs and expenses,
including counsel and expert fees.
CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY, SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN, HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC., AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS, INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R. CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H. BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL, RONALD L. GROOMS, WILLIAM J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M. FIELDS, CARL FRISCHILING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, OWEN DALY II, AURUM SECURITIES CORP., AURUM CAPITAL MANAGEMENT CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF AMERICA CORP., BANC OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A., BEAR STEARNS & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN, CANADIAN IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN GOLDBERG, MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE & CO., OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND
CORPORATIONS THAT COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT WERE MANAGED BY INVESCO AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No. 04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This lawsuit alleges violations of Sections 206 and 215 of the Investment Advisers Act; Sections 36(a), 36(b) and 47 of the Investment Company Act; control person liability under Section 48 of the Investment Company Act; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; breach of contract; unjust enrichment; interference with contract; and civil conspiracy. The plaintiffs in this lawsuit are seeking: removal of director defendants; removal of adviser, sub-adviser and distributor defendants; rescission of management and other contracts between the Funds and defendants; rescission of 12b-1 plans; disgorgement of management fees and other compensation/profits paid to adviser defendants; compensatory and punitive damages; and fees and expenses, including attorney and expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL
TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F.
MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R.
CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on
September 29, 2004. This lawsuit alleges violations of ERISA Sections
404, 405 and 406. The plaintiffs in this lawsuit are seeking:
declaratory judgment; restoration of losses suffered by the plan;
disgorgement of profits; imposition of a constructive trust; injunctive
relief; compensatory damages; costs and attorneys' fees; and equitable
restitution.
On August 25, 2005, the MDL Court issued rulings on the common issues of law presented in defendants' motions to dismiss the shareholder class and derivative complaints. These rulings were issued in the context of the Janus lawsuits, but the Court's legal determinations apply at the omnibus level to all cases within his track, including the AIM and IFG cases. The Court dismissed for failure to make pre-suit demand on the fund board all derivative causes of action but one: the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"), as to which the demand requirement does not apply. The Court dismissed all claims asserted in the class complaint but two: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934, and (ii) the excessive fee claim under Section 36(b) of the 1940 Act. In addition, the Court limited plaintiffs' potential recovery on the 36(b) claim to fees attributable to timing assets, as opposed to all fees on funds in which any timing occurred. The question whether the duplicative Section 36(b) claim properly belongs in the derivative complaint or in the class action complaint will be decided at a later date. The Court will subsequently issue an order applying his legal rulings to the allegations in the AIM and IFG complaints.
APPENDIX P-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM 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 September 20, 2005.
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 these cases are seeking: compensatory and punitive damages; interest; and attorneys' fees and costs. The Third Judicial Circuit Court for Madison County, Illinois has issued an order severing the claims of plaintiff Parthasarathy from the claims of the other plaintiffs against AIM and other defendants. As a result, AIM is a defendant in the following severed action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit Court for Madison County, Illinois (Case No. 03-L-1253A). The claims made by plaintiffs and the relief sought in the Woodbury lawsuit are identical to those in the Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury lawsuit removed the action to Federal Court (U.S. District Court, Southern District of Illinois, No. 05-CV-302-DRH). Based on a recent Federal appellate court decision (the "Kircher" case), AIM and the other defendants in the Woodbury lawsuit removed the action to Federal court (U.S. District Court, Southern District of Illinois, Cause No. 05-CV-302-DRH) on April 22, 2005. On April 26, 2005, AIM and the other defendants filed their Motion to Dismiss the plaintiffs' state law based claims. On June 10, 2005, the Court dismissed the Woodbury lawsuit based upon the Kircher ruling and ordered the court clerk to close this case. Plaintiffs filed a Motion to Amend the Judgment arguing that the Kircher ruling does not apply to require the dismissal of the claims against AIM in the Woodbury lawsuit. On July 7, 2005, the Court denied this Motion. On September 2, 2005, the Court consolidated the nine cases on this subject matter, including the case against AIM.
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. This lawsuit has been transferred to the MDL Court by order of
the United States District Court, Southern District of Illinois (East
St. Louis).
APPENDIX P-3
PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR 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, ADI and/or INVESCO Distributors and allege that the defendants charged excessive advisory and/or 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 September 20, 2005.
All of the lawsuits discussed below 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. By order of the United States District Court for the Southern District of Texas, Houston Division, the Kondracki and Papia lawsuits discussed below have been consolidated for pre-trial purpose into the Berdat lawsuit discussed below and administratively closed.
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 P-4
PENDING LITIGATION ALLEGING IMPROPER CHARGING OF DISTRIBUTION FEES
ON LIMITED OFFERING FUNDS OR SHARE CLASSES
The following civil lawsuits, including shareholder derivative suits, involve, depending on the lawsuit, one or more of IFG, AIM, ADI and/or certain of the trustees of the AIM Funds and allege that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees. These lawsuits either have been served or have had service of process waived as of September 20, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the Lieber lawsuit discussed below has been consolidated for pre-trial purposes into the Zucker lawsuit discussed below and administratively closed.
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. In March 2005, the parties
entered a Stipulation whereby, among other things, the plaintiff agreed
to dismiss without prejudice all claims against all of the individual
defendants and his claims based on state law causes of action. This
effectively limits this case to alleged violations of Section 36(b)
against ADI.
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. In
March 2005, the parties entered a Stipulation whereby, among other
things, the plaintiff agreed to dismiss without prejudice all claims
against all of the individual defendants and his claims based on state
law causes of action. This effectively limits this case to alleged
violations of Section 36(b) against ADI.
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 ADI. The plaintiff in this case is seeking: damages and costs and expenses, including counsel fees.
APPENDIX P-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 Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM 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 September 20, 2005.
By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On June 7, 2005, plaintiffs filed their Consolidated Amended Complaint in which they make substantially identical allegations to those of the individual underlying lawsuits. However, the City of Chicago Deferred Compensation Plan has been joined as an additional plaintiff in the Consolidated Amended Complaint. Plaintiffs added defendants, including current and former directors/trustees of the AIM Funds formerly advised by IFG.
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.
KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES 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
MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH 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 Southern District of Texas,
Houston Division (Civil Action No. H-04-2802), filed on July 9, 2004.
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.
JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W. MEYER AND GEORGE ROBERT PERRY 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 GROUP INCOME FUND, AIM GROUP 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 MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH 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
Southern District of Texas, Houston Division (Civil Action No.
H-04-2832), filed on July 12, 2004. 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.
ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD 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 GROUP INCOME FUND, AIM GROUP 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 MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH 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
Southern District of Texas, Houston Division (Civil Action No.
H-04-2884), filed on July 15, 2004. 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.
HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E. PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J. STEPHENSON TRUST 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 GROUP INCOME FUND, AIM GROUP 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 MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH 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
Southern District of Texas, Houston Division (Civil Action No.
H-04-3030), filed on July 27, 2004. 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.
APPENDIX P-6
PENDING LITIGATION ALLEGING FAILURE TO ENSURE PARTICIPATION IN
CLASS ACTION SETTLEMENTS
The following civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, AIM Capital and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate. This lawsuit was dismissed by the Court on August 12, 2005.
AVO HOGAN AND JULIAN W. MEADOWS, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, V. BOB R. BAKER, FRANK S. BAYLEY, JAMES T. BUNCH, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, ROBERT H. GRAHAM, GERALD J. LEWIS, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, LARRY SOLL, PH.D, MARK H. WILLIAMSON, AIM INVESTMENTS, LTD., AIM ADVISORS, INC., AIM CAPITAL MANAGEMENT, INC., INVESCO INSTITUTIONAL (N.A.), INC. AND JOHN DOES NO. 1 THROUGH 100, in the United States District Court, Northern District of Texas (Civil Action No. 3:05-CV-73-P), filed on January 11, 2005. This claim alleges violations of Sections 36(a), 36(b) and 47(b) of the Investment Company Act. The claim also alleges common law breach of fiduciary duty and negligence. The plaintiffs in this case are seeking: compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and counsel fees.
FINANCIAL STATEMENTS
Pursuant to Rule 3-03(d) of Regulation S-X, unaudited financials for the period ended June 30, 2005, for Registrant's portfolios have been included in addition to the portfolios' audited financials for the period ended December 31, 2004. Such financials 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 REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Aggressive Allocation 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 AIM Aggressive Allocation Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the period April 30, 2004 (date operations commenced) through December 31, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 December 31, 2004 by correspondence with the custodian, provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP ------------------------------- PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-1
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
----------------------------------------------------------------------
MUTUAL FUNDS-100.00%(a)
AIM Dynamics Fund-Institutional
Class-5.06%(b)(c) 225,060 $ 3,781,016
----------------------------------------------------------------------
AIM High Yield Fund-Institutional Class-4.83% 793,411 3,610,019
----------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-12.71%(d) 827,763 9,502,721
----------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-12.96%(b) 476,343 9,688,825
----------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-17.17%(b) 948,067 12,836,834
----------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-19.51%(b) 1,461,136 14,582,137
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
----------------------------------------------------------------------
MUTUAL FUNDS-(CONTINUED)
AIM Multi-Sector Fund-Institutional
Class-12.50%(e) 429,236 $ 9,340,168
----------------------------------------------------------------------
AIM Real Estate Fund-Institutional
Class-5.31% 152,712 3,967,454
----------------------------------------------------------------------
AIM Small Cap Growth Fund-Institutional
Class-9.95%(b) 267,277 7,438,317
======================================================================
Total Mutual Funds (Cost $68,782,937) 74,747,491
======================================================================
TOTAL INVESTMENTS-100.00% (Cost $68,782,937) 74,747,491
======================================================================
OTHER ASSETS LESS LIABILITIES-0.00% 3,330
======================================================================
NET ASSETS-100.00% $74,750,821
______________________________________________________________________
======================================================================
|
Notes to Schedule of Investments:
(a) The mutual fund and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than one
year from the report date.
(c) Effective October 15, 2004, the INVESCO Dynamics Fund was renamed AIM
Dynamics Fund.
(d) Effective October 15, 2004, the INVESCO International Core Equity Fund was
renamed AIM International Core Equity Fund.
(e) Effective October 15, 2004, the INVESCO Multi-Sector Fund was renamed AIM
Multi-Sector Fund.
See accompanying notes which are an integral part of the financial statements.
FS-2
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments in affiliated underlying funds, at
market value (cost $68,782,937) $74,747,491
-----------------------------------------------------------
Receivables for fund shares sold 323,853
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 2,805
-----------------------------------------------------------
Other assets 82,992
===========================================================
Total assets 75,157,141
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 313,243
-----------------------------------------------------------
Fund shares reacquired 10,610
-----------------------------------------------------------
Trustee deferred compensation and retirement
plans 2,805
-----------------------------------------------------------
Accrued distribution fees 36,624
-----------------------------------------------------------
Accrued transfer agent fees 9,592
-----------------------------------------------------------
Accrued operating expenses 33,446
===========================================================
Total liabilities 406,320
===========================================================
Net assets applicable to shares outstanding $74,750,821
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $68,640,537
-----------------------------------------------------------
Undistributed net investment income (1,934)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 147,664
-----------------------------------------------------------
Unrealized appreciation of investment
securities 5,964,554
===========================================================
$74,750,821
___________________________________________________________
===========================================================
NET ASSETS:
Class A $39,368,199
___________________________________________________________
===========================================================
Class B $22,384,069
___________________________________________________________
===========================================================
Class C $11,542,766
___________________________________________________________
===========================================================
Class R $ 1,342,379
___________________________________________________________
===========================================================
Institutional Class $ 113,408
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 3,495,476
___________________________________________________________
===========================================================
Class B 1,992,914
___________________________________________________________
===========================================================
Class C 1,027,898
___________________________________________________________
===========================================================
Class R 119,352
___________________________________________________________
===========================================================
Institutional Class 10,057
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.26
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.26 divided by
94.50%) $ 11.92
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 11.23
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 11.23
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 11.25
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 11.28
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-3
STATEMENT OF OPERATIONS
For the period April 30, 2004 (Date operations commenced) through December 31, 2004
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 187,282
========================================================================
EXPENSES:
Administrative services fees 33,470
------------------------------------------------------------------------
Custodian fees 4,484
------------------------------------------------------------------------
Distribution fees:
Class A 35,636
------------------------------------------------------------------------
Class B 63,305
------------------------------------------------------------------------
Class C 33,885
------------------------------------------------------------------------
Class R 1,704
------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 48,771
------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 20
------------------------------------------------------------------------
Trustees' fees and retirement benefits 8,567
------------------------------------------------------------------------
Registration and filing fees 42,958
------------------------------------------------------------------------
Reports to shareholders 15,438
------------------------------------------------------------------------
Professional fees 34,705
------------------------------------------------------------------------
Other 7,111
========================================================================
Total expenses 330,054
========================================================================
Less: Expenses reimbursed and expense offset arrangements (161,218)
========================================================================
Net expenses 168,836
========================================================================
Net investment income 18,446
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 39,228
========================================================================
Net realized gain from distributions of affiliated
underlying funds 311,072
========================================================================
350,300
========================================================================
Change in net unrealized appreciation of affiliated
underlying funds 5,964,554
========================================================================
Net gain from affiliated underlying funds 6,314,854
========================================================================
Net increase in net assets resulting from operations $6,333,300
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-4
STATEMENT OF CHANGES IN NET ASSETS
For the period April 30, 2004 (Date operations commenced) through December 31, 2004
2004
-------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 18,446
-------------------------------------------------------------------------
Net realized gain from affiliated underlying funds and
capital gain distributions of underlying funds 350,300
-------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 5,964,554
=========================================================================
Net increase in net assets resulting from operations 6,333,300
=========================================================================
Distributions to shareholders from net investment income:
Class A (166,197)
-------------------------------------------------------------------------
Class B (56,952)
-------------------------------------------------------------------------
Class C (29,244)
-------------------------------------------------------------------------
Class R (5,483)
-------------------------------------------------------------------------
Institutional Class (617)
=========================================================================
Total distributions from net investment income (258,493)
=========================================================================
Distributions to shareholders from net realized gains:
Class A (3,264)
-------------------------------------------------------------------------
Class B (1,898)
-------------------------------------------------------------------------
Class C (975)
-------------------------------------------------------------------------
Class R (119)
-------------------------------------------------------------------------
Institutional Class (10)
=========================================================================
Total distributions from net realized gains (6,266)
=========================================================================
Decrease in net assets resulting from distributions (264,759)
=========================================================================
Share transactions-net:
Class A 36,288,349
-------------------------------------------------------------------------
Class B 20,477,991
-------------------------------------------------------------------------
Class C 10,599,924
-------------------------------------------------------------------------
Class R 1,215,379
-------------------------------------------------------------------------
Institutional Class 100,637
=========================================================================
Net increase (decrease) in net assets resulting from
share transactions 68,682,280
=========================================================================
Net increase in net assets 74,750,821
=========================================================================
NET ASSETS:
Beginning of period --
=========================================================================
End of period (including undistributed net investment
income of $(1,934)) $74,750,821
_________________________________________________________________________
=========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-5
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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 April 30, 2004.
The Fund's investment objective is to provide long-term growth of capital consistent with a higher level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds -- ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign
FS-6
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains on 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds. AIM has contractually agreed to reimburse expenses to the extent necessary to limit other expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 0.17% of average daily net assets, through December 31, 2005. In determining the advisor's obligation to reimburse expenses, the following expenses are not taken into account, and could cause other expenses to exceed the limit stated above: (i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend expense on short sales; (v) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board of Trustees; (vi) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; (vii) expenses of the underlying funds that are paid indirectly as a result of share ownership of the underlying funds and (viii) 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. For the period April 30, 2004 (date operations commenced) through December 31, 2004, AIM reimbursed expenses of $110,983.
For the period April 30, 2004 (date operations commenced) through December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $1,431 of expenses incurred by the Fund related to market timing matters in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM was paid $33,470 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. AISI did not reimburse fees during the period under this expense limitation. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid AISI $160 for Class A, Class B, Class C and Class R shares and $0 for Institutional Class shares and AIM reimbursed fees of $48,611 for Class A, Class B, Class C and Class R and $20 for the Institutional Class shares.
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
FS-7
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Class A, Class B, Class C and Class R shares paid $35,636, $63,305, $33,885 and $1,704, 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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM Distributors advised the Fund that it retained $97,170 in front-end sales commissions from the sale of Class A shares and $40, $3,313, $1,122 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to AIM Distributors for acquiring underlying fund shares.
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 and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the period April 30, 2004 (date operations commenced) through December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 04/30/04 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
AIM Dynamics
Fund-Institutional Class $ -- $3,445,730 $ (29,488) $ 363,424 $ 3,781,016 $ -- $ 1,350
-----------------------------------------------------------------------------------------------------------------------------------
AIM High Yield Fund-
Institutional Class -- 3,519,122 (29,123) 119,512 3,610,019 69,560 508
-----------------------------------------------------------------------------------------------------------------------------------
AIM International Core
Equity Fund-
Institutional Class -- 8,692,987 (88,014) 889,962 9,502,721 88,752 7,786
-----------------------------------------------------------------------------------------------------------------------------------
AIM International Growth
Fund- Institutional Class -- 8,607,415 (75,704) 1,149,286 9,688,825 -- 7,828
-----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Basic Value
Fund- Institutional Class -- 12,050,886 (100,855) 884,644 12,836,834 -- 2,159
-----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund-
Institutional Class -- 13,778,326 (115,563) 915,987 14,582,137 -- 5,387
-----------------------------------------------------------------------------------------------------------------------------------
AIM Multi-Sector Fund-
Institutional Class -- 8,831,308 (73,788) 578,270 9,340,168 -- 224,242
-----------------------------------------------------------------------------------------------------------------------------------
AIM Real Estate Fund-
Institutional Class -- 3,561,868 (41,403) 439,766 3,967,454 28,970 98,430
-----------------------------------------------------------------------------------------------------------------------------------
AIM Small Cap Growth Fund-
Institutional Class -- 6,883,388 (73,383) 625,703 7,438,317 -- 2,610
===================================================================================================================================
Total $ -- $69,371,030 $(627,321) $5,964,554 $74,747,491 $187,282 $350,300*
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Includes $311,072 of capital gains received from affiliated underlying funds.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund received credits in transfer agency fees of $160 and credits in custodian fees of $13 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $173.
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. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested.
FS-8
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid legal fees of $863 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
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund did not borrow under the uncommitted unsecured revolving facility.
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
Distributions to Shareholders:
The tax character of distributions paid during the period April 30, 2004 (date operations commenced) through December 31, 2004 was as follows:
2004
----------------------------------------------------------------------
Distributions paid from:
Ordinary income $264,757
----------------------------------------------------------------------
Long-term capital gain 2
======================================================================
Total distributions $264,759
______________________________________________________________________
======================================================================
|
Tax Components of Net Assets:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
-------------------------------------------------------------------------
Undistributed ordinary income $ 36,177
-------------------------------------------------------------------------
Undistributed long-term gain 115,598
-------------------------------------------------------------------------
Unrealized appreciation -- investments 5,960,443
-------------------------------------------------------------------------
Temporary book/tax differences (1,934)
-------------------------------------------------------------------------
Shares of beneficial interest 68,640,537
=========================================================================
Total net assets $74,750,821
_________________________________________________________________________
=========================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to 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 trustee deferral of compensation expenses.
The Fund did not have a capital loss carryforward as of December 31, 2004.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period April 30, 2004 (date operations commenced) through December 31, 2004 was $69,371,030 and $627,321, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $5,960,443 ============================================================================== Net unrealized appreciation of investment securities $5,960,443 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $68,787,048. |
FS-9
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of distributions and stock issuance costs, on December 31, 2004, undistributed net investment income was increased by $238,113, undistributed net realized gain (loss) was decreased by $196,370 and shares of beneficial interest decreased by $41,743. This reclassification had no effect on the net assets of the Fund.
NOTE 10--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 certain 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
--------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED)
TO DECEMBER 31,
2004
------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------------
Sold:
Class A 3,574,709 $37,105,068
--------------------------------------------------------------------------------------
Class B 2,065,422 21,235,832
--------------------------------------------------------------------------------------
Class C 1,082,947 11,184,543
--------------------------------------------------------------------------------------
Class R 142,688 1,465,707
--------------------------------------------------------------------------------------
Institutional Class 10,001 100,010
======================================================================================
Issued as reinvestment of dividends:
Class A 14,820 164,949
--------------------------------------------------------------------------------------
Class B 5,195 57,658
--------------------------------------------------------------------------------------
Class C 2,647 29,375
--------------------------------------------------------------------------------------
Class R 504 5,602
--------------------------------------------------------------------------------------
Institutional Class 56 627
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 14,680 152,114
--------------------------------------------------------------------------------------
Class B (14,728) (152,114)
======================================================================================
Reacquired:
Class A (108,733) (1,133,782)
--------------------------------------------------------------------------------------
Class B (62,975) (663,385)
--------------------------------------------------------------------------------------
Class C (57,696) (613,994)
--------------------------------------------------------------------------------------
Class R (23,840) (255,930)
======================================================================================
6,645,697 $68,682,280
______________________________________________________________________________________
======================================================================================
|
FS-10
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A CLASS B CLASS C CLASS R
APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2004 2004 2004
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.02)(a) (0.02)(a) 0.02(a)
=================================================================================================================================
Net gains on securities (both realized and
unrealized) 1.28 1.28 1.28 1.28
=================================================================================================================================
Total from investment operations 1.31 1.26 1.26 1.30
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.05) (0.03) (0.03) (0.05)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.00) (0.00) (0.00) (0.00)
=================================================================================================================================
Total distributions (0.05) (0.03) (0.03) (0.05)
=================================================================================================================================
Net asset value, end of period $ 11.26 $ 11.23 $ 11.23 $11.25
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 13.12% 12.61% 12.61% 12.98%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,368 $22,384 $11,543 $1,342
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers(c)(d) 0.52% 1.17% 1.17% 0.67%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers(c)(d) 1.31% 1.96% 1.96% 1.46%
=================================================================================================================================
Ratio of net investment income to average net
assets(c) 0.40% (0.25)% (0.25)% 0.25%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 2% 2% 2% 2%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$15,148,502, $9,418,590, $5,041,442 and $506,989 for Class A, Class B,
Class C and Class R, respectively.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 0.96%.
(e) Not annualized for periods less than one year.
FS-11
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
DECEMBER 31,
2004
---------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05(a)
=================================================================================
Net gains on securities (both realized and unrealized) 1.29
=================================================================================
Total from investment operations 1.34
=================================================================================
Less distributions:
Dividends from net investment income (0.06)
---------------------------------------------------------------------------------
Distributions from net realized gains (0.00)
=================================================================================
Total distributions (0.06)
=================================================================================
Net asset value, end of period $11.28
_________________________________________________________________________________
=================================================================================
Total return(b) 13.44%
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 113
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:
With fee waivers 0.17%(c)(d)
---------------------------------------------------------------------------------
Without fee waivers 0.75%(c)(d)
=================================================================================
Ratio of net investment income to average net assets 0.75%(c)
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate(e) 2%
_________________________________________________________________________________
=================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $102,790.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 0.96%.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology
FS-12
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the
FS-13
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Department of Banking for the State of Connecticut, 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 SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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;
FS-14
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
As a result of the matters discussed above, investors in the AIM 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.
FS-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Basic Value 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 AIM Basic Value Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, 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 each of the five years in the period 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 audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP ------------------------------- PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-16
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
--------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.19%
ADVERTISING-5.07%
Interpublic Group of Cos., Inc. (The)(a)(b) 12,182,700 $ 163,248,180
--------------------------------------------------------------------------
Omnicom Group Inc.(b) 2,440,000 205,740,800
==========================================================================
368,988,980
==========================================================================
AEROSPACE & DEFENSE-1.24%
Honeywell International Inc. 2,541,300 89,987,433
==========================================================================
APPAREL RETAIL-1.96%
Gap, Inc. (The)(b) 6,767,300 142,925,376
==========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.49%
Bank of New York Co., Inc. (The) 5,425,000 181,303,500
==========================================================================
BUILDING PRODUCTS-4.61%
American Standard Cos. Inc.(a) 4,082,000 168,668,240
--------------------------------------------------------------------------
Masco Corp. 4,568,800 166,898,264
==========================================================================
335,566,504
==========================================================================
COMMUNICATIONS EQUIPMENT-0.98%
Motorola, Inc. 4,142,000 71,242,400
==========================================================================
CONSUMER ELECTRONICS-1.26%
Koninklijke (Royal) Philips Electronics N.V.-
New York Shares (Netherlands) 3,453,098 91,507,097
==========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.59%
Ceridian Corp.(a)(b) 6,071,300 110,983,364
--------------------------------------------------------------------------
First Data Corp. 5,241,000 222,952,140
==========================================================================
333,935,504
==========================================================================
DIVERSIFIED COMMERCIAL SERVICES-4.18%
Cendant Corp. 7,855,000 183,649,900
--------------------------------------------------------------------------
H&R Block, Inc.(b) 2,465,400 120,804,600
==========================================================================
304,454,500
==========================================================================
ENVIRONMENTAL SERVICES-2.87%
Waste Management, Inc. 6,982,167 209,046,080
==========================================================================
FOOD RETAIL-2.85%
Kroger Co. (The)(a) 7,766,400 136,222,656
--------------------------------------------------------------------------
Safeway Inc.(a)(b) 3,605,000 71,162,700
==========================================================================
207,385,356
==========================================================================
GENERAL MERCHANDISE STORES-2.26%
Target Corp.(b) 3,164,300 164,322,099
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
HEALTH CARE DISTRIBUTORS-6.20%
Cardinal Health, Inc. 5,134,000 $ 298,542,100
--------------------------------------------------------------------------
McKesson Corp. 4,856,900 152,798,074
==========================================================================
451,340,174
==========================================================================
HEALTH CARE EQUIPMENT-2.24%
Waters Corp.(a) 3,492,100 163,395,359
==========================================================================
HEALTH CARE FACILITIES-1.67%
HCA, Inc.(b) 3,039,000 121,438,440
==========================================================================
HEALTH CARE SERVICES-0.83%
IMS Health Inc.(b) 2,595,400 60,239,234
==========================================================================
HOTELS, RESORTS & CRUISE LINES-1.25%
Starwood Hotels & Resorts Worldwide, Inc.(b) 1,555,800 90,858,720
==========================================================================
INDUSTRIAL CONGLOMERATES-4.29%
Tyco International Ltd. (Bermuda)(b) 8,746,000 312,582,040
==========================================================================
INDUSTRIAL MACHINERY-1.25%
Parker Hannifin Corp. 1,199,200 90,827,408
==========================================================================
INVESTMENT BANKING & BROKERAGE-4.51%
Merrill Lynch & Co., Inc.(b) 2,657,000 158,808,890
--------------------------------------------------------------------------
Morgan Stanley 3,056,900 169,719,088
==========================================================================
328,527,978
==========================================================================
LEISURE PRODUCTS-0.57%
Mattel, Inc.(b) 2,126,460 41,444,705
==========================================================================
MANAGED HEALTH CARE-2.95%
UnitedHealth Group Inc. 2,444,400 215,180,532
==========================================================================
MOVIES & ENTERTAINMENT-2.46%
Walt Disney Co. (The)(b) 6,435,000 178,893,000
==========================================================================
MULTI-LINE INSURANCE-1.80%
Genworth Financial Inc.-Class A 4,864,400 131,338,800
==========================================================================
OIL & GAS DRILLING-3.58%
ENSCO International Inc. 2,555,700 81,117,918
--------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 4,241,698 179,805,578
==========================================================================
260,923,496
==========================================================================
OIL & GAS EQUIPMENT & SERVICES-3.66%
Halliburton Co.(b) 4,350,000 170,694,000
--------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 1,867,300 95,792,490
==========================================================================
266,486,490
==========================================================================
|
FS-17
MARKET
SHARES VALUE
--------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL SERVICES-6.05%
Citigroup Inc. 4,119,597 $ 198,482,184
--------------------------------------------------------------------------
JPMorgan Chase & Co. 6,213,360 242,383,174
==========================================================================
440,865,358
==========================================================================
PHARMACEUTICALS-7.71%
Pfizer Inc. 6,100,300 164,037,067
--------------------------------------------------------------------------
Sanofi-Aventis (France)(c) 3,173,760 253,233,263
--------------------------------------------------------------------------
Wyeth 3,375,000 143,741,250
==========================================================================
561,011,580
==========================================================================
PROPERTY & CASUALTY INSURANCE-2.17%
ACE Ltd. (Cayman Islands) 3,692,000 157,833,000
==========================================================================
SEMICONDUCTOR EQUIPMENT-1.08%
Novellus Systems, Inc.(a)(b) 2,834,000 79,040,260
==========================================================================
SYSTEMS SOFTWARE-3.84%
Computer Associates International, Inc.(b) 8,994,900 279,381,594
==========================================================================
THRIFTS & MORTGAGE FINANCE-5.72%
Fannie Mae(b) 3,340,000 237,841,400
--------------------------------------------------------------------------
MGIC Investment Corp.(b) 1,304,100 89,865,531
--------------------------------------------------------------------------
Radian Group Inc. 1,663,856 88,583,693
==========================================================================
416,290,624
==========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,587,847,955) 7,148,563,621
==========================================================================
|
MARKET
SHARES VALUE
--------------------------------------------------------------------------
MONEY MARKET FUNDS-1.37%
Liquid Assets Portfolio-Institutional
Class(d) 49,840,942 $ 49,840,942
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 49,840,942 49,840,942
==========================================================================
Total Money Market Funds (Cost
$99,681,884) 99,681,884
==========================================================================
TOTAL INVESTMENTS-99.56% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$5,687,529,839) 7,248,245,505
==========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-8.58%
Liquid Assets Portfolio-Institutional
Class(d)(e) 312,297,068 312,297,068
--------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 312,297,069 312,297,069
==========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $624,594,137) 624,594,137
==========================================================================
TOTAL INVESTMENTS-108.14% (Cost
$6,312,123,976) 7,872,839,642
==========================================================================
OTHER ASSETS LESS LIABILITIES-(8.14%) (592,750,524)
==========================================================================
NET ASSETS-100.00% $7,280,089,118
__________________________________________________________________________
==========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at December 31, 2004.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
market value of this security at December 31, 2004 represented 3.22% of the
Fund's Total Investments. See Note 1A.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying notes which are an integral part of the financial statements.
FS-18
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments, at market value (cost
$5,587,847,955)* $7,148,563,621
------------------------------------------------------------
Investments in affiliated money market funds
(cost $724,276,021) 724,276,021
============================================================
Total investments (cost $6,312,123,976) 7,872,839,642
____________________________________________________________
============================================================
Receivables for:
Investments sold 84,816,262
------------------------------------------------------------
Fund shares sold 58,914,960
------------------------------------------------------------
Dividends 7,304,605
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 171,948
------------------------------------------------------------
Other assets 162,662
============================================================
Total assets 8,024,210,079
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 37,218,990
------------------------------------------------------------
Fund shares reacquired 76,719,080
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 343,762
------------------------------------------------------------
Collateral upon return of securities
loaned 624,594,137
------------------------------------------------------------
Accrued distribution fees 3,515,416
------------------------------------------------------------
Accrued trustees' fees 1,126
------------------------------------------------------------
Accrued transfer agent fees 1,324,048
------------------------------------------------------------
Accrued operating expenses 404,402
============================================================
Total liabilities 744,120,961
============================================================
Net assets applicable to shares outstanding $7,280,089,118
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $6,248,186,381
------------------------------------------------------------
Undistributed net investment income (loss) (237,116)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (528,575,813)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,560,715,666
============================================================
7,280,089,118
____________________________________________________________
============================================================
NET ASSETS:
Class A $4,480,701,483
____________________________________________________________
============================================================
Class B $1,985,689,733
____________________________________________________________
============================================================
Class C $ 681,233,525
____________________________________________________________
============================================================
Class R $ 29,245,199
____________________________________________________________
============================================================
Institutional Class $ 103,219,178
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 138,198,676
____________________________________________________________
============================================================
Class B 64,854,809
____________________________________________________________
============================================================
Class C 22,253,568
____________________________________________________________
============================================================
Class R 905,941
____________________________________________________________
============================================================
Institutional Class 3,131,586
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 32.42
------------------------------------------------------------
Offering price per share:
(Net asset value of $32.42 divided by
94.50%) $ 34.31
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 30.62
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 30.61
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 32.28
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 32.96
____________________________________________________________
============================================================
|
* At December 31, 2004, securities with an aggregate market value of $611,804,898 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-19
STATEMENT OF OPERATIONS
For the year ended December 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,168,782) $ 78,567,383
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $355,442*) 3,100,780
==========================================================================
Total investment income 81,668,163
==========================================================================
EXPENSES:
Advisory fees 45,729,287
--------------------------------------------------------------------------
Administrative services fees 697,597
--------------------------------------------------------------------------
Custodian fees 542,246
--------------------------------------------------------------------------
Distribution fees:
Class A 14,891,022
--------------------------------------------------------------------------
Class B 19,569,452
--------------------------------------------------------------------------
Class C 6,757,711
--------------------------------------------------------------------------
Class R 104,692
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 16,353,257
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 1,090
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 194,751
--------------------------------------------------------------------------
Other 2,695,744
==========================================================================
Total expenses 107,536,849
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (1,255,226)
==========================================================================
Net expenses 106,281,623
==========================================================================
Net investment income (loss) (24,613,460)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 116,304,029
--------------------------------------------------------------------------
Foreign currencies (347,301)
==========================================================================
115,956,728
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 603,140,113
--------------------------------------------------------------------------
Foreign currencies (3)
==========================================================================
603,140,110
==========================================================================
Net gain from investment securities and foreign currencies 719,096,838
==========================================================================
Net increase in net assets resulting from operations $694,483,378
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-20
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (24,613,460) $ (28,543,503)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 115,956,728 (185,210,653)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 603,140,110 1,755,021,436
==============================================================================================
Net increase in net assets resulting from operations 694,483,378 1,541,267,280
==============================================================================================
Share transactions-net:
Class A 229,943,250 371,075,475
----------------------------------------------------------------------------------------------
Class B (146,534,200) (23,057,201)
----------------------------------------------------------------------------------------------
Class C (49,796,419) (12,624,445)
----------------------------------------------------------------------------------------------
Class R 14,533,591 8,800,089
----------------------------------------------------------------------------------------------
Institutional Class 96,937,383 131,671
==============================================================================================
Net increase in net assets resulting from share
transactions 145,083,605 344,325,589
==============================================================================================
Net increase in net assets 839,566,983 1,885,592,869
==============================================================================================
NET ASSETS:
Beginning of year 6,440,522,135 4,554,929,266
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(237,116) and $(112,387), respectively) $7,280,089,118 $6,440,522,135
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-21
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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-22
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
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.
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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets in excess of $1.5 billion. Effective January 1, 2005 through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund (based on the Fund's average daily net assets) do not exceed the annual rate of 0.695% of the first $250 million, plus 0.67% of the next $250 million, plus 0.645% of the next $500 million, plus 0.62% of the next $1.5 billion, plus 0.595% of the next $2.5 billion, plus 0.57% of the next $2.5 billion, plus 0.545% of the next $2.5 billion, plus 0.52% of the Fund's average daily net assets in excess of $10 billion. Further, AIM has voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM receives from the affiliated money market funds 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). Voluntary fee waivers or reimbursements may be modified or discontinued with approval by the Board of Trustees without further notice to investors. For the year ended December 31, 2004, AIM waived fees of $531,221.
FS-23
For the year ended December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $636,198 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2004, AIM was paid $697,597 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. AISI did not reimburse fees during the period under this expense limitation. For the year ended December 31, 2004, the Fund paid AISI $16,353,257 for Class A, Class B, Class C and Class R shares and $1,090 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 year ended December 31, 2004, the Class A, Class B, Class C and Class R shares paid $14,891,022, $19,569,452, $6,757,711 and $104,692, 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 December 31, 2004, AIM Distributors advised the Fund that it retained $868,069 in front-end sales commissions from the sale of Class A shares and $68,805, $229,699, $58,984 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--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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Liquid
Assets
Portfolio-
Institutional
Class $103,433,320 $ 522,046,572 $ (575,638,950) $ -- $49,840,942 $1,389,388 $ --
----------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 103,433,320 522,046,572 (575,638,950) -- 49,840,942 1,355,950 --
============================================================================================================================
Subtotal $206,866,640 $1,044,093,144 $(1,151,277,900) $ -- $99,681,884 $2,745,338 $ --
____________________________________________________________________________________________________________________________
============================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Liquid
Assets
Portfolio-
Institutional
Class $313,614,189 $ 627,570,967 $ (628,888,088) $ -- $312,297,068 $ 179,301 $ --
----------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 313,614,190 626,466,442 (627,783,563) -- 312,297,069 176,141 --
============================================================================================================================
Subtotal $627,228,379 $1,254,037,409 $(1,256,671,651) $ -- $624,594,137 $ 355,442 $ --
============================================================================================================================
Total $834,095,019 $2,298,130,553 $(2,407,949,551) $ -- $724,276,021 $3,100,780 $ --
____________________________________________________________________________________________________________________________
============================================================================================================================
|
* Dividend income is net of income rebate paid to securities lending counterparties.
FS-24
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended December 31, 2004, the Fund engaged in purchases and sales of securities of $28,451,094 and $79,546,163, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended December 31, 2004, the Fund received credits in transfer agency fees of $87,776 and credits in custodian fees of $31 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $87,807.
NOTE 6--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. Those Trustees who defer 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. 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 year ended December 31, 2004, the Fund paid legal fees of $18,435 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended December 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-25
At December 31, 2004, securities with an aggregate value of $611,804,898 were on loan to brokers. The loans were secured by cash collateral of $624,594,137 received by the Fund and subsequently invested in affiliated money market funds. For the year ended December 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $355,442 for securities lending transactions.
NOTE 9--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 December 31, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
------------------------------------------------------------------------------
Unrealized appreciation -- investments $1,550,131,361
------------------------------------------------------------------------------
Temporary book/tax differences (237,116)
------------------------------------------------------------------------------
Capital loss carryforward (517,991,508)
------------------------------------------------------------------------------
Shares of beneficial interest 6,248,186,381
==============================================================================
Total net assets $7,280,089,118
______________________________________________________________________________
==============================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $114,361,608 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of December 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-------------------------------------------------------------------------------
December 31, 2010 $320,850,425
-------------------------------------------------------------------------------
December 31, 2011 197,141,083
===============================================================================
Total capital loss carryforward $517,991,508
_______________________________________________________________________________
===============================================================================
|
* Capital loss carryforward as of the date listed above 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 year ended December 31, 2004 was $1,166,755,388 and $972,528,015, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,743,507,800 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (193,376,439) ============================================================================== Net unrealized appreciation of investment securities $1,550,131,361 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $6,322,708,281. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses and foreign currency transactions, on December 31, 2004, undistributed net investment income (loss) was increased by $24,488,731, undistributed net realized gain (loss) was increased by $347,301 and shares of beneficial interest decreased by $24,836,032. This reclassification had no effect on the net assets of the Fund.
FS-26
NOTE 12--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 certain circumstances, Class A 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(A)
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2004 2003
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 45,643,967 $1,367,897,119 45,894,184 $1,127,030,777
----------------------------------------------------------------------------------------------------------------------------
Class B 11,128,015 316,220,520 14,417,383 339,056,287
----------------------------------------------------------------------------------------------------------------------------
Class C 4,433,952 125,791,675 5,136,210 121,231,659
----------------------------------------------------------------------------------------------------------------------------
Class R 668,236 19,850,960 406,314 10,126,744
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 3,074,246 97,385,847 12,259 310,965
============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 3,531,163 106,295,761 2,640,145 65,659,146
----------------------------------------------------------------------------------------------------------------------------
Class B (3,727,321) (106,295,761) (2,769,986) (65,659,146)
============================================================================================================================
Reacquired:
Class A (41,338,578) (1,244,249,630) (34,160,186) (821,614,448)
----------------------------------------------------------------------------------------------------------------------------
Class B (12,577,796) (356,458,959) (13,284,365) (296,454,342)
----------------------------------------------------------------------------------------------------------------------------
Class C (6,194,731) (175,588,094) (5,926,753) (133,856,104)
----------------------------------------------------------------------------------------------------------------------------
Class R (177,088) (5,317,369) (56,598) (1,326,655)
----------------------------------------------------------------------------------------------------------------------------
Institutional Class (14,498) (448,464) (7,415) (179,294)
============================================================================================================================
4,449,567 $ 145,083,605 12,301,192 $ 344,325,589
____________________________________________________________________________________________________________________________
============================================================================================================================
|
()(a)There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 9% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this shareholder is also owned beneficially.
FS-27
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.24 $ 21.86 $ 28.44 $ 28.41 $ 23.84
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) (0.06) (0.04)(a) (0.02)(a) 0.06
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.21 7.44 (6.54) 0.06 4.74
=================================================================================================================================
Total from investment operations 3.18 7.38 (6.58) 0.04 4.80
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- 0.00 0.00 (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- 0.00 (0.01) (0.20)
=================================================================================================================================
Total distributions -- -- 0.00 (0.01) (0.23)
=================================================================================================================================
Net asset value, end of period $ 32.42 $ 29.24 $ 21.86 $ 28.44 $ 28.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.88% 33.76% (23.14)% 0.16% 20.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,480,701 $3,812,300 $2,534,964 $2,066,536 $448,668
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.29%(c)(d) 1.34% 1.33% 1.30% 1.32%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.11)%(c) (0.28)% (0.17)% (0.05)% 0.49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $4,254,577,848.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.31% for the year ended December 31, 2004.
CLASS B
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.80 $ 20.91 $ 27.38 $ 27.54 $ 23.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23) (0.21) (0.20)(a) (0.19)(a) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.05 7.10 (6.27) 0.04 4.53
=================================================================================================================================
Total from investment operations 2.82 6.89 (6.47) (0.15) 4.51
=================================================================================================================================
Less distributions from net realized gains -- -- 0.00 (0.01) (0.20)
=================================================================================================================================
Net asset value, end of period $ 30.62 $ 27.80 $ 20.91 $ 27.38 $ 27.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.14% 32.95% (23.63)% (0.53)% 19.47%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,985,690 $1,946,590 $1,498,499 $1,538,292 $241,157
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.94%(c)(d) 1.99% 1.98% 1.95% 1.97%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.76)%(c) (0.93)% (0.82)% (0.70)% (0.16)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $1,956,945,241.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.96% for the year ended December 31, 2004.
FS-28
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.79 $ 20.91 $ 27.38 $ 27.54 $ 23.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.23) (0.21) (0.20)(a) (0.19)(a) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.05 7.09 (6.27) 0.04 4.53
=================================================================================================================================
Total from investment operations 2.82 6.88 (6.47) (0.15) 4.51
=================================================================================================================================
Less distributions from net realized gains -- -- 0.00 (0.01) (0.20)
=================================================================================================================================
Net asset value, end of period $ 30.61 $ 27.79 $ 20.91 $ 27.38 $ 27.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 10.15% 32.90% (23.63)% (0.53)% 19.47%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $681,234 $667,412 $518,575 $566,627 $193,863
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.94%(c)(d) 1.99% 1.98% 1.95% 1.97%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.76)%(c) (0.93)% (0.82)% (0.70)% (0.16)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $675,771,120.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.96% for the year ended December 31, 2004.
CLASS R
----------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
----------------------- DECEMBER 31,
2004 2003 2002
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.16 $ 21.84 $ 27.54
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.06) (0.06) (0.05)(a)
------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.18 7.38 (5.65)
======================================================================================================
Total from investment operations 3.12 7.32 (5.70)
======================================================================================================
Net asset value, end of period $ 32.28 $ 29.16 $ 21.84
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 10.70% 33.52% (20.70)%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $29,245 $12,097 $ 1,421
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets 1.44%(c)(d) 1.49% 1.54%(e)
======================================================================================================
Ratio of net investment income (loss) to average net assets (0.26)%(c) (0.43)% (0.37)%(e)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(f) 15% 20% 30%
______________________________________________________________________________________________________
======================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $20,938,399.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.46% for the year ended December 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-29
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
---------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
--------------------- DECEMBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.56 $21.95 $ 29.63
-----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02 0.08 0.06(a)
-----------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.38 7.53 (7.74)
=====================================================================================================
Total from investment operations 3.40 7.61 (7.68)
=====================================================================================================
Net asset value, end of period $ 32.96 $29.56 $ 21.95
_____________________________________________________________________________________________________
=====================================================================================================
Total return(b) 11.50% 34.67% (25.92)%
_____________________________________________________________________________________________________
=====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $103,219 $2,123 $ 1,471
_____________________________________________________________________________________________________
=====================================================================================================
Ratio of expenses to average net assets 0.71%(c)(d) 0.71% 0.81%(e)
=====================================================================================================
Ratio of net investment income to average net assets 0.47%(c) 0.35% 0.35%(e)
_____________________________________________________________________________________________________
=====================================================================================================
Portfolio turnover rate(f) 15% 20% 30%
_____________________________________________________________________________________________________
=====================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $11,657,696.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.73% for the year ended December 31, 2004.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are
FS-30
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, 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 SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. These lawsuits allege a variety of theories of recovery, including but not limited to:
FS-31
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
(i) violation of various provisions of the Federal and state securities laws;
(ii) violation of various provisions of 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;
injunctive relief; disgorgement of management fees; imposition of a constructive
trust; removal of certain directors and/or employees; various corrective
measures under ERISA; rescission of certain Funds' advisory agreements;
interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
As a result of the matters discussed above, investors in the AIM 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.
FS-32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Conservative Allocation 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 AIM Conservative Allocation Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the period April 30, 2004 (date operations commenced) through December 31, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 December 31, 2004 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP ------------------------------ PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-33
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MUTUAL FUNDS-90.30%(A)
AIM Charter Fund-Institutional Class-5.20% 174,198 $ 2,288,956
-----------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-2.75%(b) 105,494 1,211,075
-----------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-5.30%(c) 172,365 2,333,821
-----------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-5.28%(c) 232,660 2,321,950
-----------------------------------------------------------------------
AIM Limited Maturity Treasury
Fund-Institutional Class-14.58% 628,999 6,415,786
-----------------------------------------------------------------------
AIM Multi-Sector Fund-Institutional
Class-2.71%(d) 54,760 1,191,575
-----------------------------------------------------------------------
AIM Short Term Bond Fund-Institutional
Class-24.42% 1,075,525 10,744,498
-----------------------------------------------------------------------
AIM Total Return Bond Fund-Institutional
Class-24.65% 1,034,909 10,845,845
-----------------------------------------------------------------------
AIM Trimark Endeavor Fund-Institutional
Class-5.41%(c) 188,885 2,379,953
=======================================================================
Total Mutual Funds (Cost $38,857,563) 39,733,459
=======================================================================
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
PAR MARKET
(000) VALUE
-----------------------------------------------------------------------
REPURCHASE AGREEMENTS-9.66%
State Street Bank & Trust 2.10%, 01/03/05
(Cost $4,249,226)(e) $ 4,249 4,249,226
=======================================================================
TOTAL INVESTMENTS-99.96% (Cost $43,106,789) 43,982,685
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.04% 16,761
=======================================================================
NET ASSETS-100.00% $43,999,446
_______________________________________________________________________
=======================================================================
|
Notes to Schedule of Investments:
(a) The mutual fund and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b) Effective October 15, 2004, INVESCO International Core Equity Fund was
renamed AIM International Core Equity Fund.
(c) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than one
year from the report date.
(d) Effective October 15, 2004, INVESCO Multi-Sector was renamed AIM
Multi-Sector Fund.
(e) Repurchase agreement entered into 12/31/04 with a maturing value of
$4,249,970. Collateralized by $4,390,000 U.S. Government obligations, 5.00%
due 05/25/18 with a market value at 12/31/2004 of $4,335,125.
See accompanying notes which are an integral part of the financial statements.
FS-34
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments in affiliated underlying funds, at
market value (cost $38,857,563) $39,733,459
-----------------------------------------------------------
Repurchase agreements (cost $4,249,226) 4,249,226
-----------------------------------------------------------
Total investments (cost $43,106,789) 43,982,685
===========================================================
Receivables for:
Fund shares sold 207,152
-----------------------------------------------------------
Interest 248
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 2,547
-----------------------------------------------------------
Other assets 55,965
===========================================================
Total assets 44,248,597
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 186,759
-----------------------------------------------------------
Fund shares reacquired 385
-----------------------------------------------------------
Trustee deferred compensation and retirement
plans 2,547
-----------------------------------------------------------
Accrued distribution fees 9,372
-----------------------------------------------------------
Accrued transfer agent fees 6,067
-----------------------------------------------------------
Accrued operating expenses 44,021
===========================================================
Total liabilities 249,151
===========================================================
Net assets applicable to shares outstanding $43,999,446
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $43,071,450
-----------------------------------------------------------
Undistributed net investment income (1,519)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 53,619
-----------------------------------------------------------
Unrealized appreciation of investment
securities 875,896
===========================================================
$43,999,446
___________________________________________________________
===========================================================
NET ASSETS:
Class A $20,123,514
___________________________________________________________
===========================================================
Class B $10,435,968
___________________________________________________________
===========================================================
Class C $11,751,349
___________________________________________________________
===========================================================
Class R $ 1,584,273
___________________________________________________________
===========================================================
Institutional Class $ 104,342
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 1,950,685
___________________________________________________________
===========================================================
Class B 1,014,921
___________________________________________________________
===========================================================
Class C 1,143,146
___________________________________________________________
===========================================================
Class R 153,692
___________________________________________________________
===========================================================
Institutional Class 10,108
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.32
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.32 divided
by 94.50%) $ 10.92
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.28
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.28
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.31
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.32
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-35
STATEMENT OF OPERATIONS
For the period April 30, 2004 (date operations commenced) through the year ended December 31, 2004
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 299,901
------------------------------------------------------------------------
Interest 23,723
========================================================================
Total investment income 323,624
========================================================================
EXPENSES:
Administrative services fees 33,470
------------------------------------------------------------------------
Custodian fees 4,410
------------------------------------------------------------------------
Distribution fees:
Class A 22,251
------------------------------------------------------------------------
Class B 33,661
------------------------------------------------------------------------
Class C 37,463
------------------------------------------------------------------------
Class R 2,838
------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 15,094
------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 11
------------------------------------------------------------------------
Trustees' fees 8,518
------------------------------------------------------------------------
Registration and filing fees 37,308
------------------------------------------------------------------------
Professional fees 34,637
------------------------------------------------------------------------
Other 15,313
========================================================================
Total expenses 244,974
========================================================================
Less: Expenses reimbursed and expense offset arrangement (120,619)
========================================================================
Net expenses 124,355
========================================================================
Net investment income 199,269
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 36,318
------------------------------------------------------------------------
Net realized gain from distributions of affiliated
underlying funds 162,144
========================================================================
198,462
========================================================================
Change in net unrealized appreciation of affiliated
underlying funds 875,896
========================================================================
Net gain from affiliated underlying funds 1,074,358
========================================================================
Net increase in net assets resulting from operations $1,273,627
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-36
STATEMENT OF CHANGES IN NET ASSETS
For the period April 30, 2004 (date operations commenced) through the year ended December 31, 2004
2004
---------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 199,269
---------------------------------------------------------------------------
Net realized gain from underlying funds and capital gain
distributions of affiliated underlying funds 198,462
---------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 875,896
===========================================================================
Net increase in net assets resulting from operations 1,273,627
===========================================================================
Distributions to shareholders from net investment income:
Class A (183,596)
---------------------------------------------------------------------------
Class B (76,559)
---------------------------------------------------------------------------
Class C (85,197)
---------------------------------------------------------------------------
Class R (14,664)
---------------------------------------------------------------------------
Institutional Class (1,076)
===========================================================================
Total distributions from net investment income (361,092)
===========================================================================
Distributions to shareholders from net realized gains:
Class A (5,147)
---------------------------------------------------------------------------
Class B (2,734)
---------------------------------------------------------------------------
Class C (3,043)
---------------------------------------------------------------------------
Class R (432)
---------------------------------------------------------------------------
Institutional Class (27)
===========================================================================
Total distributions from net realized gains (11,383)
===========================================================================
Decrease in net assets resulting from distributions (372,475)
===========================================================================
Share transactions-net:
Class A 19,747,738
---------------------------------------------------------------------------
Class B 10,218,111
---------------------------------------------------------------------------
Class C 11,486,975
---------------------------------------------------------------------------
Class R 1,544,357
---------------------------------------------------------------------------
Institutional Class 101,113
===========================================================================
Net increase in net assets resulting from share
transactions 43,098,294
===========================================================================
Net increase in net assets 43,999,446
===========================================================================
NET ASSETS:
Beginning of period --
===========================================================================
End of year (including undistributed net investment income
(loss) of $(1,519)) $43,999,446
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-37
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Conservative Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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 April 30, 2004.
The Fund's investment objective is to provide total return consistent with a lower level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM") (the "underlying funds"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign
FS-38
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains on ex-dividend date. Interest income is recorded on the accrual basis from settlement 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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.
F. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Eligible securities for collateral are U.S. Government Securities, U.S. Government Agency Securities and/or Investment Grade Debt Securities. Collateral consisting of U.S. Government Securities and U.S. Government Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. Collateral consisting of Investment Grade Debt Securities is marked to market daily to ensure its market value is at least 105% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to an exemptive order from the Securities and Exchange Commission, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates ("Joint repurchase agreements"). If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the 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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds. AIM has contractually agreed to reimburse expenses to the extent necessary to limit other expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 0.20% of average daily net assets, through December 31, 2005. In determining the advisor's obligation to reimburse expenses, the following expenses are not taken into account, and could cause other expenses to exceed the limit stated above: (i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend expense on short sales; (v) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board of Trustees; (vi) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; (vii) expenses of the underlying funds that are paid indirectly as a result of share ownership of the underlying funds; and (viii) 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. For the period April 30, 2004 (date operations commenced) through December 31, 2004, AIM reimbursed expenses of $119,430.
For the period April 30, 2004 (date operations commenced) through December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $1,056 of expenses incurred by the Fund related to market timing matters in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM was paid $33,470 for such services.
FS-39
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid AISI $15,094 for Class A, Class B, Class C and Class R shares and $11 for Institutional Class shares and AIM reimbursed fees for the Institutional Class shares of $11.
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Class A, Class B, Class C and Class R shares paid $22,251, $33,661, $37,463 and $2,838, 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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM Distributors advised the Fund that it retained $59,963 in front-end sales commissions from the sale of Class A shares and $0, $7,032, $1,489 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to AIM Distributors for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or AIM Distributors.
FS-40
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the period April 30, 2004 (date operations commenced) through December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 04/30/04 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
-------------------------------------------------------------------------------------------------------------------------
AIM Charter
Fund-
Institutional
Class $ -- $2,257,887 $ (100,350) $127,852 $ 2,288,956 $30,761 $ 3,567
-------------------------------------------------------------------------------------------------------------------------
AIM
International
Core Equity
Fund-
Institutional
Class -- 1,125,539 (54,115) 134,219 1,211,075 11,976 5,432
-------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Basic Value
Fund-
Institutional
Class -- 2,227,126 (102,653) 206,308 2,333,821 -- 3,040
-------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Growth Fund-
Institutional
Class -- 2,227,126 (101,806) 192,591 2,321,950 4,039
-------------------------------------------------------------------------------------------------------------------------
AIM Limited
Maturity
Treasury
Fund-
Institutional
Class -- 6,735,136 (282,738) (36,233) 6,415,786 39,616 7,794
-------------------------------------------------------------------------------------------------------------------------
AIM
Multi-Sector
Fund-
Institutional
Class -- 1,143,280 (51,756) 97,251 1,191,575 -- 32,517
-------------------------------------------------------------------------------------------------------------------------
AIM Short Term
Bond Fund-
Institutional
Class -- 11,250,434 (472,752) (34,318) 10,744,498 105,810 1,134
-------------------------------------------------------------------------------------------------------------------------
AIM Total
Return Bond
Fund-
Institutional
Class -- 11,376,865 (476,073) (63,282) 10,845,845 111,738 132,589
-------------------------------------------------------------------------------------------------------------------------
AIM Trimark
Endeavor-
Institutional
Class -- 2,227,126 (107,031) 251,508 2,379,953 -- 8,350
=========================================================================================================================
Total $ -- $40,570,519 $(1,749,274) $875,896 $39,733,459 $299,901 $198,462*
_________________________________________________________________________________________________________________________
=========================================================================================================================
|
* Includes $162,144 of capital gains received from affiliated underlying funds.
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund received credits in transfer agency fees of $122 under an expense offset arrangement, which resulted in a reduction of the Fund's total expenses of $122.
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. Those Trustees who defer 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. 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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid legal fees of $860 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
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund did not borrow under the uncommitted unsecured revolving credit facility.
FS-41
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the period April 30, 2004 (date operations commenced) through December 31, 2004 was as follows:
2004
------------------------------------------------------------------------
Distributions paid from ordinary income $372,475
________________________________________________________________________
========================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
---------------------------------------------------------------------------
Undistributed ordinary income $ 26,897
---------------------------------------------------------------------------
Undistributed long-term gain 28,685
---------------------------------------------------------------------------
Unrealized appreciation -- investments 874,338
---------------------------------------------------------------------------
Temporary book/tax differences (1,924)
---------------------------------------------------------------------------
Shares of beneficial interest 43,071,450
===========================================================================
Total net assets $43,999,446
___________________________________________________________________________
===========================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to 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 trustee deferral of compensation.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund does not have a capital loss carryforward as of December 31, 2004.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period April 30, 2004 (date operations commenced) through December 31, 2004 was $40,570,519 and $1,749,274, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $1,008,736 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (134,398) ============================================================================== Net unrealized appreciation of investment securities $ 874,338 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $43,108,347. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of stock issuance costs, on December 31, 2004, undistributed net investment income (loss) was increased by $160,304, undistributed net realized gain (loss) was decreased by $133,460 and shares of beneficial interest decreased by $26,844. This reclassification had no effect on the net assets of the Fund.
FS-42
NOTE 10--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 certain 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
--------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
DECEMBER 31, 2004
------------------------
SHARES AMOUNT
--------------------------------------------------------------------------------------
Sold:
Class A 2,129,826 $21,567,020
--------------------------------------------------------------------------------------
Class B 1,120,422 11,295,205
--------------------------------------------------------------------------------------
Class C 1,195,865 12,024,756
--------------------------------------------------------------------------------------
Class R 166,330 1,674,671
--------------------------------------------------------------------------------------
Institutional Class 10,001 100,010
======================================================================================
Issued as reinvestment of dividends:
Class A 17,350 178,529
--------------------------------------------------------------------------------------
Class B 6,647 68,130
--------------------------------------------------------------------------------------
Class C 8,491 87,033
--------------------------------------------------------------------------------------
Class R 1,468 15,096
--------------------------------------------------------------------------------------
Institutional Class 107 1,103
======================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 32,087 329,905
--------------------------------------------------------------------------------------
Class B (32,212) (329,905)
======================================================================================
Reacquired:
Class A (228,578) (2,327,716)
--------------------------------------------------------------------------------------
Class B (79,936) (815,319)
--------------------------------------------------------------------------------------
Class C (61,210) (624,814)
--------------------------------------------------------------------------------------
Class R (14,106) (145,410)
======================================================================================
4,272,552 $43,098,294
______________________________________________________________________________________
======================================================================================
|
FS-43
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A CLASS B CLASS C CLASS R
---------------- ---------------- ---------------- ----------------
APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2004 2004 2004
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06 0.04 0.04 0.06
---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.36 0.32 0.32 0.34
=================================================================================================================================
Total from investment operations 0.42 0.36 0.36 0.40
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.08) (0.08) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.00) (0.00) (0.00) (0.00)
=================================================================================================================================
Total distributions (0.10) (0.08) (0.08) (0.09)
=================================================================================================================================
Net asset value, end of period $ 10.32 $ 10.28 $ 10.28 $10.31
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(a) 4.19% 3.59% 3.59% 4.05%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,124 $10,436 $11,751 $1,584
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With expense reimbursements(b)(c) 0.55% 1.20% 1.20% 0.70%
---------------------------------------------------------------------------------------------------------------------------------
Without expense reimbursements(b)(c) 1.41% 2.06% 2.06% 1.56%
=================================================================================================================================
Ratio of net investment income to average net
assets(b) 1.74% 1.09% 1.09% 1.59%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 9% 9% 9% 9%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(a) 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, if any, and is
not annualized for periods of less than one year.
(b) Ratios are annualized and based on average daily net assets of
$9,458,434, $5,008,077, $5,573,748 and $844,572, for Class A, Class B,
Class C and Class R, respectively.
(c) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying Funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 0.63%.
(d) Not annualized for periods of less than one year.
FS-44
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
DECEMBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14
-----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.29
===================================================================================
Total from investment operations 0.43
===================================================================================
Less distributions:
Dividends from net investment income (0.11)
-----------------------------------------------------------------------------------
Distributions from net realized gains (0.00)
===================================================================================
Total distributions (0.11)
===================================================================================
Net asset value, end of period $10.32
___________________________________________________________________________________
===================================================================================
Total return(a) 4.31%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 104
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.20%(b)(c)
-----------------------------------------------------------------------------------
Without expense reimbursements 0.96%(b)(c)
===================================================================================
Ratio of net investment income to average net assets 2.09%(b)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(d) 9%
___________________________________________________________________________________
===================================================================================
|
(a) 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 purpose and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for period less than one year.
(b) Ratios are annualized and based on average daily net assets of $101,341.
(c) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying Funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 0.63%.
(d) Not annualized for period of less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is
civil penalties, all of which has been paid. The entire $325 million IFG
settlement payment will be made available for distribution to the shareholders
of those AIM Funds that IFG formerly advised that were harmed by market timing
activity, and the entire $50 million settlement payment by AIM and ADI will be
made available for distribution to the shareholders of those AIM Funds advised
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent
distribution consultant, in consultation with AIM and the independent trustees
of the AIM Funds and acceptable to
FS-45
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, the Attorney General of the State of West Virginia, the West Virginia Securities Commission and the
FS-46
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Bureau of Securities of the State of New Jersey. AIM and certain of these other parties also have received more limited inquiries from the SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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;
FS-47
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
As a result of the matters discussed above, investors in the AIM 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.
FS-48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Global Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of AIM Global Equity Fund, formerly known as AIM Global Trends Fund, (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, 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 each of the five years in the period 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 audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-49
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-51.84%
AEROSPACE & DEFENSE-2.04%
Boeing Co. (The) 114,500 $ 5,927,665
========================================================================
APPAREL RETAIL-2.39%
Aeropostale, Inc.(a) 68,600 2,018,898
------------------------------------------------------------------------
American Eagle Outfitters, Inc. 18,600 876,060
------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 39,000 1,246,440
------------------------------------------------------------------------
Stage Stores, Inc.(a) 49,000 2,034,480
------------------------------------------------------------------------
Urban Outfitters, Inc.(a) 17,000 754,800
========================================================================
6,930,678
========================================================================
APPLICATION SOFTWARE-1.03%
FactSet Research Systems Inc.(b) 51,100 2,986,284
========================================================================
COMMUNICATIONS EQUIPMENT-1.15%
QUALCOMM Inc.(b) 78,700 3,336,880
========================================================================
COMPUTER HARDWARE-3.17%
Apple Computer, Inc.(a) 38,200 2,460,080
------------------------------------------------------------------------
Dell Inc.(a) 159,700 6,729,758
========================================================================
9,189,838
========================================================================
CONSUMER FINANCE-1.30%
Capital One Financial Corp. 44,900 3,781,029
========================================================================
DEPARTMENT STORES-0.65%
J.C. Penney Co., Inc. 45,700 1,891,980
========================================================================
DIVERSIFIED COMMERCIAL SERVICES-0.97%
Apollo Group, Inc.-Class A(a) 34,793 2,808,143
========================================================================
ELECTRIC UTILITIES-1.51%
TXU Corp. 46,200 2,982,672
------------------------------------------------------------------------
Unisource Energy Corp. 57,500 1,386,325
========================================================================
4,368,997
========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-0.70%
Dionex Corp.(a) 35,700 2,023,119
========================================================================
HEALTH CARE SUPPLIES-0.38%
Haemonetics Corp.(a) 30,400 1,100,784
========================================================================
HOME ENTERTAINMENT SOFTWARE-0.41%
THQ Inc.(a) 52,100 1,195,174
========================================================================
HOMEBUILDING-0.27%
Meritage Homes Corp.(a) 6,900 777,630
========================================================================
HYPERMARKETS & SUPER CENTERS-2.23%
Costco Wholesale Corp.(b) 133,600 6,467,576
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-2.50%
3M Co.(b) 88,400 $ 7,254,988
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.70%
AT&T Corp. 164,400 3,133,464
------------------------------------------------------------------------
CenturyTel, Inc. 30,500 1,081,835
------------------------------------------------------------------------
Sprint Corp. 28,500 708,225
========================================================================
4,923,524
========================================================================
LIFE & HEALTH INSURANCE-2.52%
Prudential Financial, Inc. 133,000 7,309,680
========================================================================
MANAGED HEALTH CARE-2.97%
UnitedHealth Group Inc. 80,600 7,095,218
------------------------------------------------------------------------
WellPoint Inc.(a) 13,200 1,518,000
========================================================================
8,613,218
========================================================================
MOTORCYCLE MANUFACTURERS-1.23%
Harley-Davidson, Inc.(b) 58,800 3,572,100
========================================================================
MULTI-UTILITIES & UNREGULATED POWER-1.71%
Energen Corp. 36,200 2,133,990
------------------------------------------------------------------------
Questar Corp. 35,200 1,793,792
------------------------------------------------------------------------
Sempra Energy 28,000 1,027,040
========================================================================
4,954,822
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.94%
Anadarko Petroleum Corp. 32,600 2,112,806
------------------------------------------------------------------------
Apache Corp. 13,600 687,752
------------------------------------------------------------------------
Denbury Resources Inc.(a) 40,000 1,098,000
------------------------------------------------------------------------
Houston Exploration Co. (The)(a) 89,100 5,017,221
------------------------------------------------------------------------
Remington Oil & Gas Corp.(a) 69,900 1,904,775
------------------------------------------------------------------------
St. Mary Land & Exploration Co. 14,300 596,882
========================================================================
11,417,436
========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-0.47%
Holly Corp. 27,700 771,999
------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 10,800 596,160
========================================================================
1,368,159
========================================================================
PAPER PRODUCTS-0.99%
Georgia-Pacific Corp. 76,600 2,870,968
========================================================================
PERSONAL PRODUCTS-2.16%
Gillette Co. (The) 139,800 6,260,244
========================================================================
|
FS-50
MARKET
SHARES VALUE
------------------------------------------------------------------------
PHARMACEUTICALS-2.47%
Johnson & Johnson 113,000 $ 7,166,460
========================================================================
SEMICONDUCTOR EQUIPMENT-0.23%
Lam Research Corp.(a) 23,600 682,276
========================================================================
SEMICONDUCTORS-4.43%
Analog Devices, Inc.(b) 18,500 683,020
------------------------------------------------------------------------
Intel Corp. 159,400 3,728,366
------------------------------------------------------------------------
Linear Technology Corp. 157,500 6,104,700
------------------------------------------------------------------------
Maxim Integrated Products, Inc. 55,300 2,344,167
========================================================================
12,860,253
========================================================================
SPECIALIZED FINANCE-4.60%
CIT Group Inc. 132,700 6,080,314
------------------------------------------------------------------------
Moody's Corp.(b) 83,700 7,269,345
========================================================================
13,349,659
========================================================================
SYSTEMS SOFTWARE-0.54%
Adobe Systems Inc. 24,800 1,555,952
========================================================================
THRIFTS & MORTGAGE FINANCE-0.26%
Fremont General Corp. 30,100 757,918
========================================================================
TRUCKING-0.92%
Hunt (J.B.) Transport Services, Inc. 59,500 2,668,575
========================================================================
Total Domestic Common Stocks (Cost
$123,584,293) 150,372,009
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-43.02%
AUSTRALIA-2.23%
Australia & New Zealand Banking Group Ltd.
(Diversified Banks)(c) 60,200 970,773
------------------------------------------------------------------------
QBE Insurance Group Ltd. (Property & Casualty
Insurance)(b)(c) 342,400 4,123,039
------------------------------------------------------------------------
St. George Bank Ltd. (Diversified Banks)(c) 69,400 1,372,130
========================================================================
6,465,942
========================================================================
BELGIUM-1.23%
Algemene Maatschappij voor Nijverheidskredit
N.V. (Diversified Banks)(c) 20,300 2,073,106
------------------------------------------------------------------------
KBC Bankverzekerings holding (Diversified
Banks)(c) 19,400 1,483,730
========================================================================
3,556,836
========================================================================
BRAZIL-0.23%
Petroleo Brasileiro S.A.-Petrobras-Pfd.
(Integrated Oil & Gas) 18,100 662,054
========================================================================
CANADA-0.67%
Inmet Mining Corporation (Diversified Metals
& Mining)(a) 38,100 682,842
------------------------------------------------------------------------
Methanex Corp. (Commodity Chemicals) 69,200 1,261,532
========================================================================
1,944,374
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
CAYMAN ISLANDS-1.00%
ACE Ltd. (Property & Casualty Insurance) 67,800 $ 2,898,450
========================================================================
DENMARK-1.95%
A P Moller-Maersk A.S. (Marine)(c) 309 2,547,532
------------------------------------------------------------------------
William Demant A.S. (Health Care
Equipment)(a)(b)(c) 66,547 3,120,122
========================================================================
5,667,654
========================================================================
FRANCE-0.71%
Societe Generale (Diversified Banks)(c) 20,342 2,055,050
========================================================================
GERMANY-1.72%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods)(b)(c) 10,141 1,636,744
------------------------------------------------------------------------
Schering A.G. (Pharmaceuticals)(c) 44,970 3,342,375
========================================================================
4,979,119
========================================================================
GREECE-1.36%
OPAP S.A. (Casinos & Gaming) (Acquired
08/16/04-11/19/04; Cost $3,172,651)(c)(d) 142,452 3,933,194
========================================================================
ISRAEL-0.48%
Check Point Software Technologies Ltd.
(Systems Software)(a)(b) 56,800 1,398,984
========================================================================
ITALY-1.06%
Mediaset S.p.A. (Broadcasting & Cable TV)(c) 61,400 775,783
------------------------------------------------------------------------
Milano Assicurazioni S.p.A (Multi-Line
Insurance)(c) 270,700 1,524,025
------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Wireless
Telecommunication Services)(c) 103,300 768,670
========================================================================
3,068,478
========================================================================
JAPAN-7.76%
Chugoku Electric Power Co., Inc. (The)
(Electric Utilities)(c) 46,400 865,674
------------------------------------------------------------------------
Fuji Fire and Marine Insurance Co., Ltd.
(The) (Property & Casualty Insurance)(c) 351,000 1,142,723
------------------------------------------------------------------------
Hokkaido Electric Power Co., Inc. (Electric
Utilities)(c) 47,300 931,752
------------------------------------------------------------------------
Japan Tobacco Inc. (Tobacco)(c) 100 1,141,701
------------------------------------------------------------------------
Nikko Cordial Co., Ltd. (The) (Investment
Banking & Brokerage)(c) 110,000 583,920
------------------------------------------------------------------------
Nissin Co., Ltd. (Consumer Finance)(c) 326,900 824,847
------------------------------------------------------------------------
NTT DoCoMo, Inc. (Wireless Telecommunication
Services)(c) 2,500 4,621,914
------------------------------------------------------------------------
Takeda Pharmaceutical Co. Ltd.
(Pharmaceuticals)(c) 109,700 5,541,075
------------------------------------------------------------------------
Tohoku Electric Power Co., Inc. (Electric
Utilities) 324,000 5,820,170
------------------------------------------------------------------------
Tokai Tokyo Securities Co., Ltd. (Investment
Banking & Brokerage)(c) 340,000 1,045,081
========================================================================
22,518,857
========================================================================
|
FS-51
MARKET
SHARES VALUE
------------------------------------------------------------------------
NETHERLANDS-4.53%
ABN AMRO Holding N.V. (Diversified Banks)(c) 127,417 $ 3,370,268
------------------------------------------------------------------------
DSM N.V. (Specialty Chemicals)(c) 38,179 2,464,014
------------------------------------------------------------------------
ING Groep N.V.-Dutch Ctfs. (Other Diversified
Financial Services)(c) 242,531 7,319,704
========================================================================
13,153,986
========================================================================
NORWAY-2.03%
Norsk Hydro A.S.A. (Oil & Gas Exploration &
Production)(c) 8,342 654,868
------------------------------------------------------------------------
Statoil A.S.A. (Integrated Oil & Gas)(c) 332,415 5,239,609
========================================================================
5,894,477
========================================================================
PANAMA-0.25%
Carnival Corp. (Hotels, Resorts & Cruise
Lines) 12,500 720,375
========================================================================
SOUTH KOREA-0.80%
Honam Petrochemical Corp. (Commodity
Chemicals)(a)(c) 15,100 703,177
------------------------------------------------------------------------
POSCO (Steel)(c) 8,990 1,617,847
========================================================================
2,321,024
========================================================================
SWEDEN-1.42%
Volvo A.B.-Class B (Construction & Farm
Machinery & Heavy Trucks)(c) 104,239 4,124,485
========================================================================
SWITZERLAND-0.55%
Straumann A.G. (Health Care Equipment)(c) 7,675 1,580,717
========================================================================
TAIWAN-0.90%
China Steel Corp. (Steel)(c) 2,318,310 2,622,591
========================================================================
UNITED KINGDOM-12.14%
Aviva PLC (Multi-Line Insurance)(c) 217,590 2,614,270
------------------------------------------------------------------------
Carpetright PLC (Home Improvement Retail)(c) 78,240 1,709,378
------------------------------------------------------------------------
Friends Provident PLC (Life & Health
Insurance)(c) 1,014,040 2,991,133
------------------------------------------------------------------------
Legal & General Group PLC (Life & Health
Insurance)(c) 502,430 1,057,801
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
UNITED KINGDOM-(CONTINUED)
Lloyds TSB Group PLC (Diversified Banks)(c) 811,280 $ 7,370,501
------------------------------------------------------------------------
SABMiller PLC (Brewers)(c) 79,050 1,308,329
------------------------------------------------------------------------
Singer & Friedlander Group PLC (Diversified
Capital Markets)(c) 407,220 2,065,502
------------------------------------------------------------------------
Tesco PLC (Food Retail)(c) 1,176,750 7,255,021
------------------------------------------------------------------------
Viridian Group PLC (Electric Utilities)(c) 205,200 2,868,787
------------------------------------------------------------------------
William Hill PLC (Casinos & Gaming)(c) 437,860 4,740,819
------------------------------------------------------------------------
Wolverhampton & Dudley Breweries PLC
(Brewers)(c) 58,830 1,238,732
========================================================================
35,220,273
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $99,388,408) 124,786,920
========================================================================
MONEY MARKET FUNDS-4.92%
Liquid Assets Portfolio-Institutional
Class(e) 7,135,683 7,135,683
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(e) 7,135,683 7,135,683
========================================================================
Total Money Market Funds (Cost
$14,271,366) 14,271,366
========================================================================
TOTAL INVESTMENTS-99.78% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $237,244,067) 289,430,295
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED MONEY MARKET
FUNDS-8.39%
Liquid Assets Portfolio-Institutional
Class(e)(f) 12,166,970 12,166,970
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(e)(f) 12,166,971 12,166,971
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $24,333,941) 24,333,941
========================================================================
TOTAL INVESTMENTS-108.17% (Cost $261,578,008) 313,764,236
========================================================================
OTHER ASSETS LESS LIABILITIES-(8.17%) (23,695,595)
========================================================================
NET ASSETS-100.00% $290,068,641
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
Ctfs. - Certificates Pfd. - Preferred |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at December 31, 2004.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was
$111,342,512, which represented 35.49% 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 market value of this security at December 31, 2004 represented 1.36% of
the Fund's Net Assets. Unless otherwise indicated, this security is not
considered to be illiquid.
(e) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(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 Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-52
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments, at market value (cost
$222,972,701)* $275,158,929
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $38,605,307) 38,605,307
===========================================================
Total investments (cost $261,578,008) 313,764,236
===========================================================
Foreign currencies, at market value (cost
$173,556) 177,981
-----------------------------------------------------------
Receivables for:
Fund shares sold 951,272
-----------------------------------------------------------
Dividends 171,441
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 16,333
-----------------------------------------------------------
Other assets 62,574
===========================================================
Total assets 315,143,837
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 415,384
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 21,070
-----------------------------------------------------------
Collateral upon return of securities loaned 24,333,941
-----------------------------------------------------------
Accrued distribution fees 185,439
-----------------------------------------------------------
Accrued transfer agent fees 70,687
-----------------------------------------------------------
Accrued operating expenses 48,675
===========================================================
Total liabilities 25,075,196
===========================================================
Net assets applicable to shares outstanding $290,068,641
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $232,597,295
-----------------------------------------------------------
Undistributed net investment income (loss) (16,800)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and futures contracts 5,295,297
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 52,192,849
===========================================================
$290,068,641
___________________________________________________________
===========================================================
NET ASSETS:
Class A $182,415,843
___________________________________________________________
===========================================================
Class B $ 74,119,683
___________________________________________________________
===========================================================
Class C $ 20,375,227
___________________________________________________________
===========================================================
Institutional Class $ 13,157,888
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 11,654,774
___________________________________________________________
===========================================================
Class B 4,908,856
___________________________________________________________
===========================================================
Class C 1,351,182
___________________________________________________________
===========================================================
Institutional Class 836,367
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 15.65
-----------------------------------------------------------
Offering price per share:
(Net asset value of $15.65 divided by
95.25%) $ 16.43
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 15.10
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.08
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 15.73
___________________________________________________________
===========================================================
|
* At December 31, 2004, securities with an aggregate market value of $23,585,827 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-53
STATEMENT OF OPERATIONS
For the year ended December 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $325,780) $ 3,719,782
-------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $49,778*) 234,628
-------------------------------------------------------------------------
Interest 3,779
=========================================================================
Total investment income 3,958,189
=========================================================================
EXPENSES:
Advisory fees 2,103,152
-------------------------------------------------------------------------
Administrative services fees 50,000
-------------------------------------------------------------------------
Custodian fees 84,851
-------------------------------------------------------------------------
Distribution fees:
Class A 681,690
-------------------------------------------------------------------------
Class B 642,518
-------------------------------------------------------------------------
Class C 130,813
-------------------------------------------------------------------------
Transfer agent fees 624,439
-------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 559
-------------------------------------------------------------------------
Trustees' fees and retirement benefits 18,571
-------------------------------------------------------------------------
Other 267,786
=========================================================================
Total expenses 4,604,379
=========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (46,599)
=========================================================================
Net expenses 4,557,780
=========================================================================
Net investment income (loss) (599,591)
=========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 16,017,181
-------------------------------------------------------------------------
Foreign currencies 110,100
-------------------------------------------------------------------------
Futures contracts 274,074
=========================================================================
16,401,355
=========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities 29,650,591
-------------------------------------------------------------------------
Foreign currencies (33,717)
=========================================================================
29,616,874
=========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 46,018,229
=========================================================================
Net increase in net assets resulting from operations $45,418,638
_________________________________________________________________________
=========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-54
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2004 and 2003
2004 2003
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (599,591) $ (1,017,461)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and futures contracts 16,401,355 25,939,356
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 29,616,874 21,731,439
==========================================================================================
Net increase in net assets resulting from operations 45,418,638 46,653,334
==========================================================================================
Distributions to shareholders from net realized gains:
Class A (8,703,573) (1,099,695)
------------------------------------------------------------------------------------------
Class B (3,757,370) (657,717)
------------------------------------------------------------------------------------------
Class C (988,497) (104,451)
------------------------------------------------------------------------------------------
Institutional Class (647,260) --
==========================================================================================
Decrease in net assets resulting from distributions (14,096,700) (1,861,863)
==========================================================================================
Share transactions-net:
Class A 53,265,793 14,480,900
------------------------------------------------------------------------------------------
Class B 2,659,676 (8,037,693)
------------------------------------------------------------------------------------------
Class C 8,517,732 3,472,062
------------------------------------------------------------------------------------------
Institutional Class 12,681,245 --
==========================================================================================
Net increase in net assets resulting from share
transactions 77,124,446 9,915,269
==========================================================================================
Net increase in net assets 108,446,384 54,706,740
==========================================================================================
NET ASSETS:
Beginning of year 181,622,257 126,915,517
==========================================================================================
End of year (including undistributed net investment income
(loss) of $(16,800) and $(96,189), respectively) $290,068,641 $181,622,257
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-55
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Equity Fund, formerly known as Global Trends Fund, (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing
FS-56
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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. REDEMPTION FEES -- The Fund has 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.
G. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
H. 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.
I. 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
FS-57
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.
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. Effective January 1, 2005 through
December 31, 2009, AIM has contractually agreed to waive advisory fees to the
extent necessary so that the advisory fees payable by the Fund (based on the
Fund's average daily net assets) do not exceed the annual rate of 0.80% of the
first $250 million, plus 0.78% of the next $250 million, plus 0.76% of the next
$500 million, plus 0.74% of the next $1.5 billion, plus 0.72% of the next $2.5
billion, plus 0.70% of the next $2.5 billion, plus 0.68% of the next $2.5
billion, plus 0.66% of the Fund's average daily net assets in excess of $10
billion. AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 2.00%, 2.50%, 2.50% and 1.50% of average daily net
assets, respectively, through December 31, 2005. 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 limits stated above: (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), or items designated as such 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. AIM did not waive fees and/or reimburse
expenses during the period under this expense limitation. 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). Voluntary fee waivers or reimbursements may be
modified or discontinued at any time upon consultation with the Board of
Trustees without further notice to investors. For the year ended December 31,
2004, AIM waived fees of $2,638.
For the year ended December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $40,853 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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. Pursuant to such agreement for the year ended December 31, 2004, AIM was paid $50,000.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. AISI did not reimburse fees during the period under this expense limitation. For the year ended December 31, 2004, the Fund paid AISI $624,439 for Class A, Class B, Class C and Class R shares and $559 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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 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 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. Effective January 1, 2005 the Trustees approved a permanent reduction in the annual rate payable by the Fund to AIM Distributors to 0.35% of the average daily net assets of Class A 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 year ended December 31, 2004, the Class A, Class B and Class C shares paid $681,690, $642,518 and $130,813, 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 December 31, 2004, AIM Distributors advised the Fund that it retained $62,651 in front-end sales commissions from the sale of Class A shares and $222, $11,701 and $1,023 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-58
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 5,266,639 $44,591,119 $(42,722,075) $ -- $ 7,135,683 $ 92,944 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 5,266,639 44,591,119 (42,722,075) -- 7,135,683 91,906 --
==================================================================================================================================
Subtotal $10,533,278 $89,182,238 $(85,444,150) $ -- $14,271,366 $184,850 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME* GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $10,778,427 $ 83,149,415 $ (81,760,872) $ -- $12,166,970 $ 25,047 $ --
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 10,778,427 70,428,829 (69,040,285) -- 12,166,971 24,731 --
==================================================================================================================================
Subtotal $21,556,854 $153,578,244 $(150,801,157) $ -- $24,333,941 $ 49,778 $ --
==================================================================================================================================
Total $32,090,132 $242,760,482 $(236,245,307) $ -- $38,605,307 $234,628 $ --
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
* Dividend income is net of income rebate paid to securities lending counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended December 31, 2004, the Fund received credits in transfer agency fees of $2,852 and credits in custodian fees of $256 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $3,108.
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. Those Trustees who defer 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. 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 year ended December 31, 2004, the Fund paid legal fees of $3,079 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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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
FS-59
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 year ended December 31, 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 SSB, 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 at 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 December 31, 2004, securities with an aggregate value of $23,585,827 were on loan to brokers. The loans were secured by cash collateral of $24,333,941 received by the Fund and subsequently invested in affiliated money market funds. For the year ended December 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $49,778 for securities lending transactions.
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2004 and 2003 was as follows:
2004 2003
---------------------------------------------------------------------------------------
Distributions paid from:
---------------------------------------------------------------------------------------
Ordinary income $ 6,685,845 $ --
---------------------------------------------------------------------------------------
Long-term capital gain 7,410,855 1,861,863
=======================================================================================
Total distributions $14,096,700 $1,861,863
_______________________________________________________________________________________
=======================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Undistributed ordinary income $ 1,838,390
----------------------------------------------------------------------------
Undistributed long-term gain 3,453,814
----------------------------------------------------------------------------
Unrealized appreciation -- investments 52,195,942
----------------------------------------------------------------------------
Temporary book/tax differences (16,800)
----------------------------------------------------------------------------
Shares of beneficial interest 232,597,295
============================================================================
Total net assets $290,068,641
____________________________________________________________________________
============================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation difference is attributable primarily to the deferral of losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $6,621.
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 trustee deferral of compensation and retirement plan expenses.
The Fund utilized $1,005,765 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes.
The Fund does not have a capital loss carryforward as of December 31, 2004.
FS-60
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 December 31, 2004 was $292,547,653 and $234,340,910, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $52,665,543 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (476,222) =============================================================================== Net unrealized appreciation of investment securities $52,189,321 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $261,574,915. |
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of foreign currency transactions, passive foreign investment company transactions, partnership transactions, return of capital on distributions, use of proceeds from redemptions as distributions and net operating losses, on December 31, 2004, undistributed net investment income (loss) was increased by $678,980, undistributed net realized gain was decreased by $1,069,096 and shares of beneficial interest increased by $390,116. This reclassification had no effect on the net assets of the Fund.
FS-61
NOTE 11--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C 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. Institutional Class shares are sold at net asset value. Under certain 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 (a)
----------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2004 2003
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,988,346 $ 58,566,755 3,158,946 $ 35,887,979
----------------------------------------------------------------------------------------------------------------------
Class B 1,895,283 26,890,560 1,249,960 14,101,531
----------------------------------------------------------------------------------------------------------------------
Class C 790,970 11,285,487 478,993 5,518,242
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 842,987 12,784,860 -- --
======================================================================================================================
Issued as reinvestment of dividends:
Class A 529,315 8,130,282 79,020 1,041,482
----------------------------------------------------------------------------------------------------------------------
Class B 236,432 3,503,919 48,243 617,509
----------------------------------------------------------------------------------------------------------------------
Class C 64,371 952,680 7,806 99,838
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 37 576 -- --
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,088,278 15,900,255 1,005,025 11,354,405
----------------------------------------------------------------------------------------------------------------------
Class B (1,123,493) (15,900,255) (1,032,096) (11,354,405)
======================================================================================================================
Reacquired:(c)
Class A (2,017,034) (29,331,499) (3,045,439) (33,802,966)
----------------------------------------------------------------------------------------------------------------------
Class B (846,484) (11,834,548) (1,080,501) (11,402,328)
----------------------------------------------------------------------------------------------------------------------
Class C (264,781) (3,720,435) (195,070) (2,146,018)
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) (6,657) (104,191) -- --
======================================================================================================================
5,177,570 $ 77,124,446 674,887 $ 9,915,269
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the
outstanding shares of the Fund and it owns 6% of the outstanding shares of
the Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to these
entity, which are considered to be related, for providing services to the
Fund, AIM and/or AIM affiliates including but not limited to services such
as, securities brokerage, distribution, third party record keeping and
account servicing. The Trust has no knowledge as to whether all or any
portion of the shares owned of record by these shareholders are also owned
beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
(c) Amount is net of redemption fees of $4,833, $2,171, $476 and $107 for Class
A, Class B, Class C and Institutional Class for 2004, respectively, and
$234, $160, and $18 for Class A, Class B and Class C shares for 2003,
respectively, based on the relative net assets of each class.
FS-62
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 DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.54 $ 9.95 $ 11.00 $ 13.33 $ 15.78
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.02)(a) (0.06)(a) (0.02)(a) (0.10)(a) (0.19)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.93 3.79 (1.03) (2.17) (1.11)
===============================================================================================================================
Total from investment operations 2.91 3.73 (1.05) (2.27) (1.30)
===============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.06) --
-------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.80) (0.14) -- -- (1.15)
===============================================================================================================================
Total distributions (0.80) (0.14) -- (0.06) (1.15)
===============================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
===============================================================================================================================
Net asset value, end of period $ 15.65 $ 13.54 $ 9.95 $ 11.00 $ 13.33
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 21.64% 37.51% (9.55)% (17.03)% (7.90)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $182,416 $109,205 $68,335 $80,630 $20,751
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.94%(c) 2.00% 2.00% 2.00% 2.00%
-------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.96%(c) 2.05% 2.05% 2.25% 2.14%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.11)%(c) (0.50)% (0.18)% (0.94)% (1.27)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 115% 178% 80% 154% 260%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $136,338,037.
FS-63
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS B
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2004 2003 2002 2001 2000
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.15 $ 9.71 $ 10.80 $ 13.12 $ 15.62
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.11)(a) (0.07)(a) (0.15)(a) (0.26)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.84 3.69 (1.02) (2.13) (1.09)
=============================================================================================================================
Total from investment operations 2.75 3.58 (1.09) (2.28) (1.35)
=============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.04) --
-----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.80) (0.14) -- -- (1.15)
=============================================================================================================================
Total distributions (0.80) (0.14) -- (0.04) (1.15)
=============================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
=============================================================================================================================
Net asset value, end of period $ 15.10 $ 13.15 $ 9.71 $ 10.80 $ 13.12
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 21.06% 36.90% (10.09)% (17.36)% (8.30)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $74,120 $62,424 $54,029 $81,459 $22,279
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.44%(c) 2.50% 2.50% 2.50% 2.50%
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.46%(c) 2.55% 2.55% 2.75% 2.64%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.61)%(c) (1.00)% (0.68)% (1.44)% (1.77)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 115% 178% 80% 154% 260%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $64,251,818.
FS-64
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.14 $ 9.71 $ 10.79 $ 13.11 $15.62
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.11)(a) (0.07)(a) (0.16)(a) (0.26)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.83 3.68 (1.01) (2.12) (1.10)
===========================================================================================================================
Total from investment operations 2.74 3.57 (1.08) (2.28) (1.36)
===========================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.04) --
---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.80) (0.14) -- -- (1.15)
===========================================================================================================================
Total distributions (0.80) (0.14) -- (0.04) (1.15)
===========================================================================================================================
Redemptions fees added to shares of beneficial interest 0.00 0.00 -- -- --
===========================================================================================================================
Net asset value, end of period $ 15.08 $13.14 $ 9.71 $ 10.79 $13.11
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 21.00% 36.79% (10.01)% (17.37)% (8.37)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $20,375 $9,993 $ 4,551 $ 4,600 $1,789
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.44%(c) 2.50% 2.50% 2.50% 2.50%
---------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.46%(c) 2.55% 2.55% 2.75% 2.64%
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.61)%(c) (1.00)% (0.68)% (1.44)% (1.77)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 115% 178% 80% 154% 260%
___________________________________________________________________________________________________________________________
===========================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $13,081,341.
FS-65
NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE SALES
COMMENCED) TO
DECEMBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 13.98
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07(a)
-----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.48
===================================================================================
Total from investment operations 2.55
===================================================================================
Less distributions from net realized gains (0.80)
===================================================================================
Redemptions fees added to shares of beneficial interest (.00)
===================================================================================
Net asset value, end of period $ 15.73
___________________________________________________________________________________
===================================================================================
Total return(b) 18.39%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $13,158
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.18%(c)
-----------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.20%(c)
===================================================================================
Ratio of net investment income to average net assets 0.65%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(d) 115%
___________________________________________________________________________________
===================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$3,030,285.
(d) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM
FS-66
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, 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 SEC, the NASD,
FS-67
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
FS-68
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
As a result of the matters discussed above, investors in the AIM 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.
FS-69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Mid Cap Core Equity Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of AIM Mid Cap Core Equity Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, 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 each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-70
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-90.69%
ADVERTISING-1.27%
Valassis Communications, Inc.(a) 1,338,700 $ 46,867,887
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.46%
V. F. Corp. 975,300 54,012,114
===========================================================================
APPLICATION SOFTWARE-3.05%
Fair Issac Corp. 1,000,000 36,680,000
---------------------------------------------------------------------------
Intuit Inc.(a) 865,000 38,068,650
---------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 1,421,400 37,681,314
===========================================================================
112,429,964
===========================================================================
BREWERS-1.28%
Heineken N.V.(Netherlands)(b) 1,418,268 47,088,107
===========================================================================
COMPUTER HARDWARE-1.91%
Diebold, Inc. 930,000 51,828,900
---------------------------------------------------------------------------
Intergraph Corp.(a) 700,000 18,851,000
===========================================================================
70,679,900
===========================================================================
CONSUMER FINANCE-0.61%
MoneyGram International, Inc. 1,072,800 22,678,992
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-2.00%
Ceridian Corp.(a) 4,046,450 73,969,106
===========================================================================
DISTRIBUTORS-1.23%
Genuine Parts Co. 1,030,000 45,381,800
===========================================================================
DIVERSIFIED BANKS-0.76%
Comerica Inc. 458,600 27,983,772
===========================================================================
DIVERSIFIED CHEMICALS-1.02%
Engelhard Corp. 1,225,000 37,570,750
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-1.07%
Rentokil Initial PLC (United Kingdom)(b) 14,000,000 39,572,450
===========================================================================
ELECTRIC UTILITIES-2.98%
FPL Group, Inc. 561,200 41,949,700
---------------------------------------------------------------------------
Wisconsin Energy Corp. 2,020,000 68,094,200
===========================================================================
110,043,900
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.49%
Agilent Technologies, Inc.(a) 1,733,400 41,774,940
---------------------------------------------------------------------------
Amphenol Corp.-Class A(a) 1,020,000 37,474,800
---------------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 968,000 49,668,080
===========================================================================
128,917,820
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
ENVIRONMENTAL SERVICES-2.26%
Republic Services, Inc. 2,489,600 $ 83,501,184
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.44%
Scotts Co. (The)-Class A(a) 724,200 53,243,184
===========================================================================
FOOD RETAIL-1.79%
Kroger Co. (The)(a) 3,770,000 66,125,800
===========================================================================
GENERAL MERCHANDISE STORES-0.81%
Family Dollar Stores, Inc. 952,000 29,730,960
===========================================================================
HEALTH CARE SERVICES-2.16%
IMS Health Inc. 1,613,200 37,442,372
---------------------------------------------------------------------------
Medco Health Solutions, Inc.(a) 1,012,900 42,136,640
===========================================================================
79,579,012
===========================================================================
HOME FURNISHINGS-2.25%
Mohawk Industries, Inc.(a) 908,500 82,900,625
===========================================================================
INDUSTRIAL MACHINERY-2.70%
Dover Corp. 1,202,600 50,437,044
---------------------------------------------------------------------------
ITT Industries, Inc. 583,000 49,234,350
===========================================================================
99,671,394
===========================================================================
INTEGRATED OIL & GAS-2.37%
Amerada Hess Corp. 633,600 52,195,968
---------------------------------------------------------------------------
Murphy Oil Corp. 437,950 35,233,077
===========================================================================
87,429,045
===========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-1.09%
CenturyTel, Inc. 1,130,000 40,081,100
===========================================================================
LEISURE PRODUCTS-1.44%
Mattel, Inc. 2,725,550 53,120,969
===========================================================================
METAL & GLASS CONTAINERS-2.57%
Ball Corp. 965,400 42,458,292
---------------------------------------------------------------------------
Pactiv Corp.(a) 2,075,000 52,476,750
===========================================================================
94,935,042
===========================================================================
OFFICE ELECTRONICS-1.84%
Xerox Corp.(a) 3,993,800 67,934,538
===========================================================================
OFFICE SERVICES & SUPPLIES-1.00%
Pitney Bowes Inc. 800,000 37,024,000
===========================================================================
OIL & GAS DRILLING-3.05%
Nabors Industries, Ltd. (Bermuda)(a) 725,420 37,206,792
---------------------------------------------------------------------------
Noble Corp. (Cayman Islands)(a) 1,519,000 75,555,060
===========================================================================
112,761,852
===========================================================================
|
FS-71
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-2.90%
BJ Services Co. 781,000 $ 36,347,740
---------------------------------------------------------------------------
FMC Technologies, Inc.(a) 1,146,000 36,901,200
---------------------------------------------------------------------------
Smith International, Inc.(a) 621,550 33,818,535
===========================================================================
107,067,475
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-4.09%
Apache Corp. 739,000 37,371,230
---------------------------------------------------------------------------
Newfield Exploration Co.(a) 600,000 35,430,000
---------------------------------------------------------------------------
Pioneer Natural Resources Co. 1,095,800 38,462,580
---------------------------------------------------------------------------
Plains Exploration & Production Co.(a) 1,530,000 39,780,000
===========================================================================
151,043,810
===========================================================================
OIL & GAS REFINING, MARKETING &
TRANSPORTATION-2.07%
Williams Cos., Inc. (The) 4,691,500 76,424,535
===========================================================================
PACKAGED FOODS & MEATS-2.90%
Campbell Soup Co. 1,741,500 52,053,435
---------------------------------------------------------------------------
Tate & Lyle PLC (United Kingdom)(b) 6,100,000 55,182,037
===========================================================================
107,235,472
===========================================================================
PAPER PRODUCTS-1.42%
Georgia-Pacific Corp. 1,396,000 52,322,080
===========================================================================
PHARMACEUTICALS-3.60%
Forest Laboratories, Inc.(a) 1,700,000 76,262,000
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,900,000 56,734,000
===========================================================================
132,996,000
===========================================================================
PROPERTY & CASUALTY INSURANCE-1.47%
ACE Ltd. (Cayman Islands) 1,272,000 54,378,000
===========================================================================
PUBLISHING-3.06%
Belo Corp.-Class A 1,496,200 39,260,288
---------------------------------------------------------------------------
Knight-Ridder, Inc. 509,000 34,072,460
---------------------------------------------------------------------------
Lee Enterprises, Inc. 23,800 1,096,704
---------------------------------------------------------------------------
New York Times Co. (The)-Class A 945,400 38,572,320
===========================================================================
113,001,772
===========================================================================
REGIONAL BANKS-5.04%
City National Corp. 425,700 30,075,705
---------------------------------------------------------------------------
Compass Bancshares, Inc. 613,000 29,834,710
---------------------------------------------------------------------------
Hibernia Corp.-Class A 1,100,000 32,461,000
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
REGIONAL BANKS-(CONTINUED)
Hudson United Bancorp 649,900 $ 25,593,062
---------------------------------------------------------------------------
Marshall & Ilsley Corp. 690,000 30,498,000
---------------------------------------------------------------------------
TCF Financial Corp. 1,168,000 37,539,520
===========================================================================
186,001,997
===========================================================================
REINSURANCE-1.05%
RenaissanceRe Holdings Ltd. (Bermuda) 742,000 38,643,360
===========================================================================
RESTAURANTS-1.66%
Outback Steakhouse, Inc. 826,000 37,814,280
---------------------------------------------------------------------------
Wendy's International, Inc. 600,100 23,559,926
===========================================================================
61,374,206
===========================================================================
SEMICONDUCTORS-3.14%
Microchip Technology Inc. 1,291,500 34,431,390
---------------------------------------------------------------------------
National Semiconductor Corp. 2,457,000 44,103,150
---------------------------------------------------------------------------
Xilinx, Inc. 1,259,000 37,329,350
===========================================================================
115,863,890
===========================================================================
SPECIALTY CHEMICALS-6.31%
International Flavors & Fragrances Inc. 2,220,000 95,104,800
---------------------------------------------------------------------------
Rohm & Haas Co. 850,000 37,595,500
---------------------------------------------------------------------------
Sigma-Aldrich Corp. 850,000 51,391,000
---------------------------------------------------------------------------
Valspar Corp. (The) 975,050 48,762,251
===========================================================================
232,853,551
===========================================================================
SYSTEMS SOFTWARE-1.46%
Computer Associates International, Inc. 1,739,600 54,031,976
===========================================================================
THRIFTS & MORTGAGE FINANCE-1.62%
New York Community Bancorp, Inc. 1,630,000 33,529,100
---------------------------------------------------------------------------
Webster Financial Corp. 520,000 26,332,800
===========================================================================
59,861,900
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,782,427,210) 3,348,335,291
===========================================================================
MONEY MARKET FUNDS-9.38%
Liquid Assets Portfolio-Institutional
Class(c) 173,231,587 173,231,587
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 173,231,588 173,231,588
===========================================================================
Total Money Market Funds (Cost
$346,463,175) 346,463,175
===========================================================================
TOTAL INVESTMENTS-100.07% (Cost
$3,128,890,385) 3,694,798,466
===========================================================================
OTHER ASSETS LESS LIABILITIES-(0.07%) (2,641,745)
===========================================================================
NET ASSETS-100.00% $3,692,156,721
___________________________________________________________________________
===========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was
$141,842,594, which represented 3.84% of the Fund's Total Investments. See
Note 1A.
(c) 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-72
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments, at market value (cost
$2,782,427,210) $3,348,335,291
------------------------------------------------------------
Investments in affiliated money market funds
(cost $346,463,175) 346,463,175
============================================================
Total investments (cost $3,128,890,385) 3,694,798,466
============================================================
Foreign currencies, market at value (cost
$107) 109
------------------------------------------------------------
Receivables for:
Investments sold 5,074,352
------------------------------------------------------------
Fund shares sold 3,680,087
------------------------------------------------------------
Dividends 4,223,356
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 81,370
------------------------------------------------------------
Other assets 46,806
============================================================
Total assets 3,707,904,546
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 13,019,247
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 157,776
------------------------------------------------------------
Accrued distribution fees 1,392,149
------------------------------------------------------------
Accrued transfer agent fees 949,234
------------------------------------------------------------
Accrued operating expenses 229,419
============================================================
Total liabilities 15,747,825
============================================================
Net assets applicable to shares outstanding $3,692,156,721
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,032,813,077
------------------------------------------------------------
Undistributed net investment income (loss) (103,846)
------------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 93,536,835
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 565,910,655
============================================================
$3,692,156,721
____________________________________________________________
============================================================
NET ASSETS:
Class A $2,552,041,118
____________________________________________________________
============================================================
Class B $ 702,360,945
____________________________________________________________
============================================================
Class C $ 324,872,777
____________________________________________________________
============================================================
Class R $ 61,302,903
____________________________________________________________
============================================================
Institutional Class $ 51,578,978
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE,UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 89,092,463
____________________________________________________________
============================================================
Class B 27,294,375
____________________________________________________________
============================================================
Class C 12,639,789
____________________________________________________________
============================================================
Class R 2,147,975
____________________________________________________________
============================================================
Institutional Class 1,769,133
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 28.64
------------------------------------------------------------
Offering price per share:
(Net asset value of $28.64 divided by
94.50%) $ 30.31
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 25.73
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 25.70
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 28.54
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 29.15
____________________________________________________________
============================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-73
STATEMENT OF OPERATIONS
For the year ended December 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $405,552) $ 36,817,579
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $838,913*) 6,866,087
==========================================================================
Total investment income 43,683,666
==========================================================================
EXPENSES:
Advisory fees 22,980,408
--------------------------------------------------------------------------
Administrative services fees 592,602
--------------------------------------------------------------------------
Custodian fees 247,985
--------------------------------------------------------------------------
Distribution fees:
Class A 8,097,059
--------------------------------------------------------------------------
Class B 7,044,856
--------------------------------------------------------------------------
Class C 3,172,774
--------------------------------------------------------------------------
Class R 236,821
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 10,391,471
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 25,980
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 102,374
--------------------------------------------------------------------------
Other 1,493,011
==========================================================================
Total expenses 54,385,341
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (2,454,287)
==========================================================================
Net expenses 51,931,054
==========================================================================
Net investment income (loss) (8,247,388)
==========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCIES:
Net realized gain from:
Investment securities 366,533,789
--------------------------------------------------------------------------
Foreign currencies 211,471
==========================================================================
366,745,260
==========================================================================
Change in net unrealized appreciation of:
Investment securities 79,254,965
--------------------------------------------------------------------------
Foreign currencies 2,574
==========================================================================
79,257,539
==========================================================================
Net gain from investment securities and foreign currencies 446,002,799
==========================================================================
Net increase in net assets resulting from operations $437,755,411
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-74
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,247,388) $ (12,705,701)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 366,745,260 32,726,586
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 79,257,539 552,964,014
==============================================================================================
Net increase in net assets resulting from operations 437,755,411 572,984,899
==============================================================================================
Distributions to shareholders from net realized gains:
Class A (165,796,542) --
----------------------------------------------------------------------------------------------
Class B (50,732,936) --
----------------------------------------------------------------------------------------------
Class C (23,417,554) --
----------------------------------------------------------------------------------------------
Class R (3,882,376) --
----------------------------------------------------------------------------------------------
Institutional Class (3,241,989) --
==============================================================================================
Decrease in net assets resulting from distributions (247,071,397) --
==============================================================================================
Share transactions-net:
Class A 390,359,539 579,154,494
----------------------------------------------------------------------------------------------
Class B (34,584,177) 64,080,894
----------------------------------------------------------------------------------------------
Class C 6,470,062 87,744,331
----------------------------------------------------------------------------------------------
Class R 31,669,516 20,697,205
----------------------------------------------------------------------------------------------
Institutional Class 23,251,227 17,715,683
==============================================================================================
Net increase in net assets resulting from share
transactions 417,166,167 769,392,607
==============================================================================================
Net increase in net assets 607,850,181 1,342,377,506
==============================================================================================
NET ASSETS:
Beginning of year 3,084,306,540 1,741,929,034
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(103,846) and $(40,566), respectively) $3,692,156,721 $3,084,306,540
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-75
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Core Equity Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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. As of February 27, 2004, the Fund's shares are offered on a limited basis.
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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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-76
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
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.
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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets 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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended December 31, 2004, AIM waived fees of $108,680.
For the year ended December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $317,567 expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
FS-77
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. Pursuant to such agreement for the year ended December 31, 2004, AIM was paid $592,602.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average daily net assets. AISI did not reimburse fees during the period under this expense limitation. For the year ended December 31, 2004, the Fund paid AISI $10,391,471 for Class A, Class B, Class C and Class R shares and $25,980 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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. During the periods the Fund is offered on a limited basis, AIM Distributors has agreed to waive Class A distribution plan fees equal to 0.10% of the average daily net assets of Class A shares. Pursuant to the Plans, for the year ended December 31, 2004, the Class A, Class B, Class C and Class R shares paid $6,113,548, $7,044,856, $3,172,774 and $236,821, respectively, after AIM Distributors waived Plan fees of $1,983,511 for Class A shares.
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 December 31, 2004, AIM Distributors advised the Fund that it retained $342,343 in front-end sales commissions from the sale of Class A shares and $5,653, $78,355, $51,150 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--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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $280,649,536 $ 506,744,719 $ (614,162,668) $ -- $173,231,587 $3,042,011 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 280,649,537 506,744,719 (614,162,668) -- 173,231,588 2,985,163 --
===================================================================================================================================
Subtotal $561,299,073 $1,013,489,438 $(1,228,325,336) $ -- $346,463,175 $6,027,174 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $111,811,023 $ 341,477,447 $ (453,288,470) $ -- $ -- $ 424,951 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 111,811,024 341,477,446 (453,288,470) -- -- 413,962 --
===================================================================================================================================
Subtotal $223,622,047 $ 682,954,893 $ (906,576,940) $ -- $ -- $ 838,913 $ --
===================================================================================================================================
Total $784,921,120 $1,696,444,331 $(2,134,902,276) $ -- $346,463,175 $6,866,087 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Dividend income is net of income rebate paid to securities lending counterparties.
FS-78
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended December 31, 2004, the Fund engaged in purchases and sales of securities of $23,130,457 and $29,647,937 respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended December 31, 2004, the Fund received credits in transfer agency fees of $43,374 and credits in custodian fees of $1,155 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $44,529.
NOTE 6--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. Those Trustees who defer 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. 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 year ended December 31, 2004, the Fund paid legal fees of $10,441 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended December 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
FS-79
NOTE 8--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 December 31, 2004, there were no securities on loan to brokers. For the year ended December 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $838,913 for securities lending transactions.
NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the years ended December 31, 2004 and 2003 was as follows:
2004 2003
--------------------------------------------------------------------------------------
DISTRIBUTIONS PAID FROM:
Ordinary income $ 61,010,954 $ --
--------------------------------------------------------------------------------------
Long-term capital gain 186,060,443 --
======================================================================================
Total $247,071,397 --
______________________________________________________________________________________
======================================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
------------------------------------------------------------------------------
Undistributed ordinary income $ 14,007,038
------------------------------------------------------------------------------
Undistributed long-term gain 82,789,737
------------------------------------------------------------------------------
Unrealized appreciation -- investments 562,650,715
------------------------------------------------------------------------------
Temporary book/tax differences (103,846)
------------------------------------------------------------------------------
Shares of beneficial interest 3,032,813,077
==============================================================================
Total net assets $3,692,156,721
______________________________________________________________________________
==============================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to losses on wash sales. The tax-basis unrealized appreciation on investments amount includes appreciation on foreign currencies of $2,574.
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 trustee deferral of compensation and retirement plan expenses.
The Fund had no capital loss carryforward as of December 31, 2004.
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 year ended December 31, 2004 was $2,021,706,718 and $1,669,277,654 respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $576,516,739 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (13,868,598) ============================================================================== Net unrealized appreciation of investment securities $562,648,141 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $3,132,150,325. |
NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, the treatment of a portion of the proceeds from redemption as a tax distribution and foreign currency transactions, on December 31, 2004, undistributed net investment income (loss) was increased by $8,184,108, undistributed net realized gain was decreased by $26,384,108 and shares of beneficial interest increased by $18,200,000. This reclassification had no effect on the net assets of the Fund.
FS-80
NOTE 12--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 certain circumstances, Class A 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(A)
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2004 2003
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 26,967,314 $ 758,954,877 39,159,554 $ 919,929,496
----------------------------------------------------------------------------------------------------------------------------
Class B 2,582,107 65,607,722 9,715,804 206,896,230
----------------------------------------------------------------------------------------------------------------------------
Class C 2,143,852 54,462,214 6,108,343 131,431,251
----------------------------------------------------------------------------------------------------------------------------
Class R 1,569,932 44,033,714 1,091,088 25,744,449
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,058,147 30,243,199 888,554 21,488,316
============================================================================================================================
Issued as reinvestment of dividends:
Class A 5,671,172 160,721,002 -- --
----------------------------------------------------------------------------------------------------------------------------
Class B 1,875,385 47,766,053 -- --
----------------------------------------------------------------------------------------------------------------------------
Class C 867,525 22,069,827 -- --
----------------------------------------------------------------------------------------------------------------------------
Class R 130,679 3,690,363 -- --
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 112,239 3,236,984 -- --
============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,357,549 38,348,118 2,043,981 47,199,629
----------------------------------------------------------------------------------------------------------------------------
Class B (1,495,064) (38,348,118) (2,234,738) (47,199,629)
============================================================================================================================
Reacquired:
Class A (20,151,373) (567,664,458) (16,620,639) (387,974,631)
----------------------------------------------------------------------------------------------------------------------------
Class B (4,286,417) (109,609,834) (4,607,039) (95,615,707)
----------------------------------------------------------------------------------------------------------------------------
Class C (2,745,120) (70,061,979) (2,055,754) (43,686,920)
----------------------------------------------------------------------------------------------------------------------------
Class R (567,140) (16,054,561) (208,127) (5,047,244)
----------------------------------------------------------------------------------------------------------------------------
Institutional Class (358,294) (10,228,956) (157,954) (3,772,633)
============================================================================================================================
14,732,493 $ 417,166,167 33,123,073 $ 769,392,607
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 8% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record is also owned beneficially.
FS-81
NOTE 13--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.92 $ 21.17 $ 23.85 $ 24.04 $ 23.48
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.08)(a) (0.09)(a) (0.05)(a) 0.10(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 3.71 5.83 (2.56) 0.18 4.10
=================================================================================================================================
Total from investment operations 3.70 5.75 (2.65) 0.13 4.20
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.02) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.98) -- (0.03) (0.30) (3.64)
=================================================================================================================================
Total distributions (1.98) -- (0.03) (0.32) (3.64)
=================================================================================================================================
Net asset value, end of period $ 28.64 $ 26.92 $ 21.17 $ 23.85 $ 24.04
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 13.82% 27.10% (11.13)% 0.56% 18.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,552,041 $2,025,407 $1,072,673 $490,118 $259,803
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.30%(c)(d) 1.41% 1.43% 1.39% 1.37%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.02)%(c) (0.33)% (0.40)% (0.22)% 0.38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 56% 38% 38% 68% 72%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $2,313,445,525.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.40%.
CLASS B
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.54 $ 19.43 $ 22.03 $ 22.36 $ 22.21
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.21)(a) (0.22)(a) (0.19)(a) (0.07)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.36 5.32 (2.35) 0.16 3.86
===============================================================================================================================
Total from investment operations 3.17 5.11 (2.57) (0.03) 3.79
===============================================================================================================================
Less distributions from net realized gains (1.98) -- (0.03) (0.30) (3.64)
===============================================================================================================================
Net asset value, end of period $ 25.73 $ 24.54 $ 19.43 $ 22.03 $ 22.36
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 13.00% 26.30% (11.69)% (0.10)% 17.98%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $702,361 $702,267 $500,166 $333,783 $210,608
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.06% 2.08% 2.05% 2.02%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.76)%(c) (0.98)% (1.05)% (0.87)% (0.27)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 56% 38% 38% 68% 72%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $704,485,548.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
FS-82
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.51 $ 19.41 $ 22.00 $ 22.33 $ 22.19
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.21)(a) (0.22)(a) (0.19)(a) (0.07)(a)
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.36 5.31 (2.34) 0.16 3.85
===============================================================================================================================
Total from investment operations 3.17 5.10 (2.56) (0.03) 3.78
===============================================================================================================================
Less distributions from net realized gains (1.98) -- (0.03) (0.30) (3.64)
===============================================================================================================================
Net asset value, end of period $ 25.70 $ 24.51 $ 19.41 $ 22.00 $ 22.33
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 13.01% 26.28% (11.66)% (0.10)% 17.95%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $324,873 $303,296 $161,487 $68,085 $19,466
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 2.04%(c)(d) 2.06% 2.08% 2.05% 2.02%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.76)%(c) (0.98)% (1.05)% (0.87)% (0.27)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 56% 38% 38% 68% 72%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $317,277,441.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.05%.
CLASS R
------------------------------------------
JUNE 3, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
----------------------- DECEMBER 31,
2004 2003 2002
--------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 26.89 $ 21.18 $24.54
--------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.12)(a) (0.07)(a)
--------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.70 5.83 (3.26)
========================================================================================================
Total from investment operations 3.63 5.71 (3.33)
========================================================================================================
Less distributions from net realized gains (1.98) -- (0.03)
========================================================================================================
Net asset value, end of period $ 28.54 $ 26.89 $21.18
________________________________________________________________________________________________________
========================================================================================================
Total return(b) 13.57% 26.96% (13.59)%
________________________________________________________________________________________________________
========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $61,303 $27,281 $2,786
________________________________________________________________________________________________________
========================================================================================================
Ratio of expenses to average net assets 1.54%(c)(d) 1.56% 1.58%(e)
========================================================================================================
Ratio of net investment income (loss) to average net assets (0.26)%(c) (0.48)% (0.55)%(e)
________________________________________________________________________________________________________
========================================================================================================
Portfolio turnover rate(f) 56% 38% 38%
________________________________________________________________________________________________________
========================================================================================================
|
(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 and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $47,364,232.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.55%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-83
NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
---------------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
--------------------------- DECEMBER 31,
2004 2003 2002
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.23 $ 21.27 $25.03
-----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.14(a) 0.08(a) 0.04(a)
-----------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.76 5.88 (3.77)
===========================================================================================================
Total from investment operations 3.90 5.96 (3.73)
===========================================================================================================
Less distributions from net realized gains (1.98) -- (0.03)
===========================================================================================================
Net asset value, end of period $ 29.15 $ 27.23 $21.27
___________________________________________________________________________________________________________
===========================================================================================================
Total return(b) 14.40% 28.02% (14.92)%
___________________________________________________________________________________________________________
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,579 $26,056 $4,817
___________________________________________________________________________________________________________
===========================================================================================================
Ratio of expenses to average net assets 0.80%(c)(d) 0.76% 0.82%(e)
===========================================================================================================
Ratio of net investment income to average net assets 0.48%(c) 0.32% 0.21%(e)
___________________________________________________________________________________________________________
===========================================================================================================
Portfolio turnover rate(f) 56% 38% 38%
___________________________________________________________________________________________________________
===========================================================================================================
|
(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 and is not annualized for periods less than one
year.
(c) Ratios are based on average daily net assets of $37,490,011.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.81%.
(e) Annualized.
(f) Not annualized for periods less than one year.
NOTE 14--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year
FS-84
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, 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 SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
FS-85
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
A civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate. This lawsuit alleges as theories of recovery: (i) violation of various provisions of the Federal securities laws;
FS-86
NOTE 14--LEGAL PROCEEDINGS (CONTINUED)
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This lawsuit has been filed in Federal court and seeks such remedies as compensatory and punitive damages; forfeiture of all commissions and fees paid by the class of plaintiffs; and costs and attorneys' fees.
As a result of the matters discussed above, investors in the AIM 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.
FS-87
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Moderate Allocation 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 AIM Moderate Allocation Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, and the results of its operations, the changes in its net assets and the financial highlights for the period April 30, 2004 (date operations commenced) through December 31, 2004, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 December 31, 2004 by correspondence with the custodian, provides a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-88
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
------------------------------------------------------------------------
MUTUAL FUNDS-100.03%(A)
AIM High Yield Fund-Institutional Class-9.88% 3,190,332 $ 14,516,008
------------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-10.43%(b) 1,334,007 15,314,403
------------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-7.98%(c) 575,995 11,715,748
------------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-10.06%(c) 1,091,077 14,773,178
------------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-12.49%(c) 1,838,558 18,348,807
------------------------------------------------------------------------
AIM Mid Cap Basic Value Fund-Institutional
Class-5.12%(c) 570,692 7,516,013
------------------------------------------------------------------------
AIM Mid Cap Stock Fund-Institutional
Class-5.16%(d) 421,192 7,585,673
------------------------------------------------------------------------
AIM Multi-Sector Fund-Institutional
Class-5.12%(c)(e) 345,638 $ 7,521,090
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
MUTUAL FUNDS-(CONTINUED)
AIM Short Term Bond Fund-Institutional
Class-4.71% 692,760 $ 6,920,670
------------------------------------------------------------------------
AIM Total Return Bond Fund-Institutional
Class-23.78% 3,332,484 34,924,433
------------------------------------------------------------------------
AIM Trimark Small Companies
Fund-Institutional Class-5.30%(c) 604,303 7,789,461
========================================================================
Total Mutual Funds (Cost $138,502,386) 146,925,484
========================================================================
TOTAL INVESTMENTS-100.03% (Cost $138,502,386) 146,925,484
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.03%) (38,800)
========================================================================
NET ASSETS-100.00% $146,886,684
________________________________________________________________________
========================================================================
|
Notes to Schedule of Investments:
(a) The mutual fund and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b) Effective October 15, 2004, the INVESCO International Core Equity Fund was
renamed AIM International Core Equity Fund.
(c) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than one
year from the report date.
(d) Effective October 15, 2004, the INVESCO Mid-Cap Growth Fund was renamed AIM
Mid Cap Stock Fund.
(e) Effective October 15, 2004, the INVESCO Multi-Sector Fund was renamed AIM
Multi-Sector Fund.
See accompanying notes which are an integral part of the financial statements.
FS-89
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments in affiliated underlying funds,
at market value (cost $138,502,386) $146,925,484
-----------------------------------------------------------
Receivables for:
Fund shares sold 771,447
-----------------------------------------------------------
Amount due from advisor 2,157
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 3,679
-----------------------------------------------------------
Other assets 95,093
===========================================================
Total assets 147,797,860
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 766,212
-----------------------------------------------------------
Fund shares reacquired 5,235
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 3,858
-----------------------------------------------------------
Accrued distribution fees 76,335
-----------------------------------------------------------
Accrued transfer agent fees 16,582
-----------------------------------------------------------
Accrued operating expenses 42,954
===========================================================
Total liabilities 911,176
===========================================================
Net assets applicable to shares outstanding $146,886,684
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $138,324,236
-----------------------------------------------------------
Undistributed net investment income 4,502
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 134,848
-----------------------------------------------------------
Unrealized appreciation of investment
securities 8,423,098
===========================================================
$146,886,684
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 71,430,950
___________________________________________________________
===========================================================
Class B $ 45,845,906
___________________________________________________________
===========================================================
Class C $ 27,338,985
___________________________________________________________
===========================================================
Class R $ 2,160,691
___________________________________________________________
===========================================================
Institutional Class $ 110,152
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 6,556,692
___________________________________________________________
===========================================================
Class B 4,217,641
___________________________________________________________
===========================================================
Class C 2,515,196
___________________________________________________________
===========================================================
Class R 198,434
___________________________________________________________
===========================================================
Institutional Class 10,098
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.89
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.89 divided
by 94.50%) $ 11.52
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 10.87
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 10.87
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 10.89
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 10.91
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-90
STATEMENT OF OPERATIONS
For the period April 30, 2004 (Date operations commenced) through December 31, 2004
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 821,084
========================================================================
EXPENSES:
Administrative services fees 33,470
------------------------------------------------------------------------
Custodian fees 4,503
------------------------------------------------------------------------
Distribution fees:
Class A 68,484
------------------------------------------------------------------------
Class B 124,720
------------------------------------------------------------------------
Class C 92,170
------------------------------------------------------------------------
Class R 2,377
------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 55,519
------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 6
------------------------------------------------------------------------
Trustees' fees and retirement benefits 9,106
------------------------------------------------------------------------
Registration and filing fees 54,343
------------------------------------------------------------------------
Professional fees 37,032
------------------------------------------------------------------------
Other 24,104
========================================================================
Total expenses 505,834
========================================================================
Less: Expenses reimbursed and expense offset arrangements (197,254)
========================================================================
Net expenses 308,580
========================================================================
Net investment income 512,504
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 18,318
------------------------------------------------------------------------
Net realized gain from distributions of affiliated
underlying funds 620,000
========================================================================
638,318
========================================================================
Change in net unrealized appreciation of affiliated
underlying funds 8,423,098
========================================================================
Net gain from affiliated underlying funds 9,061,416
========================================================================
Net increase in net assets resulting from operations $9,573,920
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-91
STATEMENT OF CHANGES IN NET ASSETS
For the period April 30, 2004 (Date operations commenced) through December 31, 2004
2004
----------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 512,504
----------------------------------------------------------------------------
Net realized gain from affiliated underlying funds and
capital gain distributions of underlying funds 638,318
----------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 8,423,098
============================================================================
Net increase in net assets resulting from operations 9,573,920
============================================================================
Distributions to shareholders from net investment income:
Class A (574,401)
----------------------------------------------------------------------------
Class B (294,431)
----------------------------------------------------------------------------
Class C (174,411)
----------------------------------------------------------------------------
Class R (16,807)
----------------------------------------------------------------------------
Institutional Class (1,044)
============================================================================
Total distributions from net investment income (1,061,094)
============================================================================
Distributions to shareholders from net realized gains:
Class A (4,300)
----------------------------------------------------------------------------
Class B (2,835)
----------------------------------------------------------------------------
Class C (1,679)
----------------------------------------------------------------------------
Class R (132)
----------------------------------------------------------------------------
Institutional Class (7)
============================================================================
Total distributions from net realized gains (8,953)
============================================================================
Decrease in net assets resulting from distributions (1,070,047)
============================================================================
Share transactions-net:
Class A 67,422,298
----------------------------------------------------------------------------
Class B 43,220,987
----------------------------------------------------------------------------
Class C 25,581,696
----------------------------------------------------------------------------
Class R 2,056,769
----------------------------------------------------------------------------
Institutional Class 101,061
============================================================================
Net increase in net assets resulting from share
transactions 138,382,811
============================================================================
Net increase in net assets 146,886,684
============================================================================
NET ASSETS:
Beginning of period --
============================================================================
End of period (including undistributed net investment
income of $4,502) $146,886,684
____________________________________________________________________________
============================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-92
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Moderate Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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 April 30, 2004.
The Fund's investment objective is to provide total return consistent with a moderate level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign
FS-93
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains on 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds. AIM has contractually agreed to reimburse expenses to the extent necessary to limit other expenses (excluding certain items discussed below) of Class A, Class B, Class C, Class R and Institutional Class shares to 0.05% of average daily net assets, through December 31, 2005. In determining the advisor's obligation to reimburse expenses, the following expenses are not taken into account, and could cause other expenses to exceed the cap stated above: (i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend expense on short sales; (v) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to-day operations), or items designated as such by the Fund's Board of Trustees; (vi) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; (vii) expenses of the underlying funds that are paid indirectly as a result of share ownership of the underlying funds and (viii) 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. For the period April 30, 2004 (date operations commenced) through December 31, 2004, AIM reimbursed expenses of $140,021.
For the year ended December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $1,693 of expenses incurred by the Fund related to market timing matters in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM was paid $33,470 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid AISI $55,519 for Class A, Class B, Class C and Class R shares and reimbursed $55,187 for Class A, Class B, Class C and Class R shares and $6 for Institutional Class shares and AIM reimbursed fees for the Institutional Class shares of $6.
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,
FS-94
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Class A, Class B, Class C and Class R shares paid $68,484, $124,720, $92,170 and $2,377, 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 April 30, 2004 (date operations commenced) through December 31, 2004, AIM Distributors advised the Fund that it retained $203,518 in front-end sales commissions from the sale of Class A shares and $0, $6,749, $801 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to AIM Distributors for acquiring underlying fund shares.
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 and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the period April 30, 2004 (date operations commenced) through December 31, 2004.
INVESTMENTS OF AFFILIATES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 04/30/04 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
AIM High Yield Fund-
Institutional Class $ -- $ 14,082,695 $ (72,829) $ 505,603 $14,516,008 $287,846 $ 539
------------------------------------------------------------------------------------------------------------------------------------
AIM International Core
Equity Fund-
Institutional Class -- 13,920,051 (121,587) 1,510,049 15,314,403 143,692 5,890
------------------------------------------------------------------------------------------------------------------------------------
AIM International Growth
Fund- Institutional Class -- 10,332,269 (70,846) 1,451,412 11,715,748 -- 2,913
------------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Basic Value
Fund- Institutional Class -- 13,776,360 (87,741) 1,084,950 14,773,178 -- (391)
------------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund-
Institutional Class -- 17,220,449 (103,300) 1,229,924 18,348,807 -- 1,734
------------------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Basic Value
Fund- Institutional Class -- 6,888,180 (44,917) 672,259 7,516,013 -- 491
------------------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Stock Fund-
Institutional Class -- 6,910,351 (38,435) 713,703 7,585,673 -- 54
------------------------------------------------------------------------------------------------------------------------------------
AIM Multi-Sector Fund-
Institutional Class -- 7,066,075 (40,846) 494,842 7,521,090 -- 178,913
------------------------------------------------------------------------------------------------------------------------------------
AIM Short Term Bond Fund-
Institutional Class -- 6,972,390 (35,578) (16,144) 6,920,670 61,725 2
------------------------------------------------------------------------------------------------------------------------------------
AIM Total Return Bond Fund-
Institutional Class -- 35,240,995 (179,635) (139,494) 34,924,433 327,821 332,511
------------------------------------------------------------------------------------------------------------------------------------
AIM Trimark Small Companies
Fund- Institutional Class -- 6,929,389 (59,422) 915,994 7,789,461 -- 115,662
====================================================================================================================================
Total $ -- $139,339,204 $(855,136) $8,423,098 $146,925,484 $821,084 $638,318*
____________________________________________________________________________________________________________________________________
====================================================================================================================================
|
(*) Includes $620,000 of capital gains received from affiliated underlying funds.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the period April 30, 2004 (date operations commenced) through December 31, 2004, the Fund received credits in transfer agency fees of $331 and credits in custodian fees of $16 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $347.
FS-95
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. Those Trustees who defer 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. 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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund paid legal fees of $877 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
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 April 30, 2004 (date operations commenced) through December 31, 2004, the Fund did not 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS TO SHAREHOLDERS:
The tax character of distributions paid during the period April 30, 2004 (date operations commenced) through December 31, 2004 was as follows:
2004
------------------------------------------------------------------------
Distributions paid from ordinary income $1,070,047
________________________________________________________________________
========================================================================
|
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
--------------------------------------------------------------------------
Undistributed ordinary income $ 20,689
--------------------------------------------------------------------------
Undistributed long-term gain 125,484
--------------------------------------------------------------------------
Unrealized appreciation -- investments 8,418,431
--------------------------------------------------------------------------
Temporary book/tax differences (2,156)
--------------------------------------------------------------------------
Shares of beneficial interest 138,324,236
==========================================================================
Total net assets $146,886,684
__________________________________________________________________________
==========================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to 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 trustee deferral of compensation and retirement plan expenses.
The Fund did not have a capital loss carryforward as of December 31, 2004.
FS-96
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period April 30, 2004 (date operations commenced) through December 31, 2004 was $139,339,204 and $855,136, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $8,574,119 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (155,688) ============================================================================== Net unrealized appreciation of investment securities $8,418,431 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $138,507,053. |
NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of stock issuance costs
and dividends from underlying funds, on December 31, 2004, undistributed net
investment income was increased by $553,092, undistributed net realized gain
(loss) was decreased by $494,517 and shares of beneficial interest decreased by
$58,575. This reclassification had no effect on the net assets of the Fund.
NOTE 10--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 certain 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
----------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
DECEMBER 31, 2004
--------------------------
SHARES AMOUNT
----------------------------------------------------------------------------------------
Sold:
Class A 6,787,469 $ 69,794,121
----------------------------------------------------------------------------------------
Class B 4,360,168 44,695,661
----------------------------------------------------------------------------------------
Class C 2,567,290 26,126,832
----------------------------------------------------------------------------------------
Class R 212,270 2,203,895
----------------------------------------------------------------------------------------
Institutional Class 10,001 100,010
========================================================================================
Issued as reinvestment of dividends:
Class A 49,479 534,374
----------------------------------------------------------------------------------------
Class B 25,211 271,771
----------------------------------------------------------------------------------------
Class C 14,140 152,429
----------------------------------------------------------------------------------------
Class R 1,256 13,567
----------------------------------------------------------------------------------------
Institutional Class 97 1,051
========================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 56,416 586,979
----------------------------------------------------------------------------------------
Class B (56,538) (586,979)
========================================================================================
Reacquired:
Class A (336,672) (3,493,176)
----------------------------------------------------------------------------------------
Class B (111,200) (1,159,466)
----------------------------------------------------------------------------------------
Class C (66,234) (697,565)
----------------------------------------------------------------------------------------
Class R (15,092) (160,693)
========================================================================================
13,498,061 $138,382,811
________________________________________________________________________________________
========================================================================================
|
FS-97
NOTE 11--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A CLASS B CLASS C CLASS R
---------------- ---------------- ---------------- ----------------
APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004 APRIL 30, 2004
(DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS (DATE OPERATIONS
COMMENCED) TO COMMENCED) TO COMMENCED) TO COMMENCED) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2004 2004 2004
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $10.00
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.11 0.06 0.06 0.10
---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.87 0.88 0.88 0.88
=================================================================================================================================
Total from investment operations 0.98 0.94 0.94 0.98
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.09) (0.07) (0.07) (0.09)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.00) (0.00) (0.00) (0.00)
=================================================================================================================================
Total distributions (0.09) (0.07) (0.07) (0.09)
=================================================================================================================================
Net asset value, end of period $ 10.89 $ 10.87 $ 10.87 $10.89
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 9.85% 9.44% 9.44% 9.80%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $71,431 $45,846 $27,339 $2,161
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With expense reimbursements(c)(d) 0.40% 1.05% 1.05% 0.55%
---------------------------------------------------------------------------------------------------------------------------------
Without expense reimbursements(c)(d) 0.87% 1.52% 1.52% 1.02%
=================================================================================================================================
Ratio of net investment income to average net
assets(c) 1.56% 0.91% 0.91% 1.41%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 1% 1% 1% 1%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 sale charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$29,111,832, $18,555,857, $13,713,029 and $707,444 for Class A, Class B,
Class C and Class R shares, respectively.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 92%.
(e) Not annualized for periods less than one year.
FS-98
NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
DECEMBER 31,
2004
-----------------------------------------------------------------------------------
Net asset value, beginning of period $10.00
-----------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13(a)
-----------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.88
===================================================================================
Total from investment operations 1.01
===================================================================================
Less distributions:
Dividends from net investment income (0.10)
-----------------------------------------------------------------------------------
Distributions from net realized gains (0.00)
===================================================================================
Total distributions (0.10)
===================================================================================
Net asset value, end of period $10.91
___________________________________________________________________________________
===================================================================================
Total return(b) 10.16%
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 110
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.05%(c)(d)
-----------------------------------------------------------------------------------
Without expense reimbursements 0.40%(c)(d)
___________________________________________________________________________________
===================================================================================
Ratio of net investment income to average net assets 1.91%(c)
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(e) 1%
___________________________________________________________________________________
===================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $102,394.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary. The estimated underlying expenses for
the Fund, expressed as a percentage of average daily net assets of the
Fund was 92%.
(e) Not annualized for periods less than one year.
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology
FS-99
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant to be appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement amounts may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
REGULATORY INQUIRIES AND PENDING LITIGATION
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the
FS-100
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Department of Banking for the State of Connecticut, 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 SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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
FS-101
NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
As a result of the matters discussed above, investors in the AIM 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.
FS-102
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of AIM Small Cap Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of AIM Small Cap Growth Fund (one of the funds constituting AIM Growth Series, hereafter referred to as the "Fund") at December 31, 2004, 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 each of the five years in the period 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 audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP February 18, 2005 Houston, Texas |
FS-103
FINANCIALS
SCHEDULE OF INVESTMENTS
December 31, 2004
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.20%
AEROSPACE & DEFENSE-1.84%
Applied Signal Technology, Inc. 72,900 $ 2,569,725
---------------------------------------------------------------------------
Mercury Computer Systems, Inc.(a) 484,800 14,388,864
---------------------------------------------------------------------------
United Industrial Corp.(b) 426,200 16,510,988
===========================================================================
33,469,577
===========================================================================
AIR FREIGHT & LOGISTICS-1.37%
Forward Air Corp.(a) 297,600 13,302,720
---------------------------------------------------------------------------
UTI Worldwide, Inc. (United Kingdom) 170,000 11,563,400
===========================================================================
24,866,120
===========================================================================
AIRLINES-0.39%
AirTran Holdings, Inc.(a)(b) 656,900 7,028,830
===========================================================================
APPAREL RETAIL-2.55%
Aeropostale, Inc.(a)(b) 363,800 10,706,634
---------------------------------------------------------------------------
bebe stores, inc.(b) 549,675 14,830,231
---------------------------------------------------------------------------
Jos. A. Bank Clothiers, Inc.(a)(b) 480,174 13,588,924
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a) 317,000 7,056,420
===========================================================================
46,182,209
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-1.96%
Fossil, Inc.(a) 349,750 8,967,590
---------------------------------------------------------------------------
Oxford Industries, Inc. 315,700 13,038,410
---------------------------------------------------------------------------
Quiksilver, Inc.(a)(b) 454,800 13,548,492
===========================================================================
35,554,492
===========================================================================
APPLICATION SOFTWARE-4.52%
Catapult Communications Corp.(a) 344,700 8,327,952
---------------------------------------------------------------------------
Epicor Software Corp.(a) 887,700 12,507,693
---------------------------------------------------------------------------
Macromedia, Inc.(a) 587,200 18,273,664
---------------------------------------------------------------------------
Magma Design Automation, Inc.(a)(b) 303,200 3,808,192
---------------------------------------------------------------------------
MicroStrategy Inc.-Class A(a) 241,800 14,568,450
---------------------------------------------------------------------------
NAVTEQ Corp.(a) 252,700 11,715,172
---------------------------------------------------------------------------
RSA Security Inc.(a)(b) 641,476 12,868,009
===========================================================================
82,069,132
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.66%
Affiliated Managers Group, Inc.(a)(b) 176,500 11,956,110
===========================================================================
BIOTECHNOLOGY-4.03%
Affymetrix, Inc.(a)(b) 363,700 13,293,235
---------------------------------------------------------------------------
Amylin Pharmaceuticals, Inc.(a) 414,700 9,687,392
---------------------------------------------------------------------------
Eyetech Pharmaceuticals Inc.(a)(b) 262,500 11,943,750
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
BIOTECHNOLOGY-(CONTINUED)
Genencor International Inc.(a) 322,000 5,280,800
---------------------------------------------------------------------------
Gen-Probe Inc.(a) 337,000 $ 15,235,770
---------------------------------------------------------------------------
Techne Corp.(a)(b) 218,100 8,484,090
---------------------------------------------------------------------------
United Therapeutics Corp.(a) 205,500 9,278,325
===========================================================================
73,203,362
===========================================================================
BROADCASTING & CABLE TV-0.67%
Radio One, Inc.-Class A(a) 273,800 4,408,180
---------------------------------------------------------------------------
Radio One, Inc.-Class D(a)(b) 480,100 7,739,212
===========================================================================
12,147,392
===========================================================================
BUILDING PRODUCTS-0.66%
Trex Co., Inc.(a)(b) 227,400 11,924,856
===========================================================================
CASINOS & GAMING-1.68%
Penn National Gaming, Inc.(a) 252,900 15,313,095
---------------------------------------------------------------------------
Shuffle Master, Inc.(a)(b) 323,400 15,232,140
===========================================================================
30,545,235
===========================================================================
CATALOG RETAIL-1.14%
Coldwater Creek Inc.(a) 303,200 9,359,784
---------------------------------------------------------------------------
Insight Enterprises, Inc.(a) 550,000 11,286,000
===========================================================================
20,645,784
===========================================================================
COMMODITY CHEMICALS-0.38%
Spartech Corp. 254,300 6,888,987
===========================================================================
COMMUNICATIONS EQUIPMENT-2.27%
Plantronics, Inc. 241,500 10,015,005
---------------------------------------------------------------------------
Polycom, Inc.(a)(b) 660,300 15,398,196
---------------------------------------------------------------------------
SafeNet, Inc.(a)(b) 430,100 15,801,874
===========================================================================
41,215,075
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.82%
GameStop Corp.-Class A(a) 662,900 14,822,444
===========================================================================
COMPUTER HARDWARE-0.69%
Intergraph Corp.(a) 303,200 8,165,176
---------------------------------------------------------------------------
PalmOne, Inc.(a) 136,400 4,303,420
===========================================================================
12,468,596
===========================================================================
COMPUTER STORAGE & PERIPHERALS-0.72%
Avid Technology, Inc.(a)(b) 212,200 13,103,350
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.56%
Toro Co. (The) 124,500 10,128,075
===========================================================================
|
FS-104
MARKET
SHARES VALUE
---------------------------------------------------------------------------
CONSTRUCTION MATERIALS-0.90%
Eagle Materials Inc.(b) 189,700 $ 16,380,595
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.64%
Euronet Worldwide, Inc.(a) 643,900 16,754,278
---------------------------------------------------------------------------
Global Payments Inc.(b) 222,300 13,013,442
===========================================================================
29,767,720
===========================================================================
DIVERSIFIED COMMERCIAL SERVICES-2.31%
Charles River Associates Inc.(a)(b) 224,400 10,495,188
---------------------------------------------------------------------------
Corporate Executive Board Co. (The)(b) 208,000 13,923,520
---------------------------------------------------------------------------
CoStar Group Inc.(a)(b) 379,000 17,502,220
===========================================================================
41,920,928
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-1.10%
II-VI Inc.(a)(b) 268,300 11,400,067
---------------------------------------------------------------------------
Woodward Governor Co. 118,800 8,507,268
===========================================================================
19,907,335
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-2.05%
Cognex Corp.(b) 151,600 4,229,640
---------------------------------------------------------------------------
Daktronics, Inc.(a)(b) 303,200 7,546,648
---------------------------------------------------------------------------
FLIR Systems, Inc.(a)(b) 268,300 17,114,857
---------------------------------------------------------------------------
Keithley Instruments, Inc. 424,700 8,366,590
===========================================================================
37,257,735
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-1.05%
Trimble Navigation Ltd.(a)(b) 576,400 19,044,256
===========================================================================
ENVIRONMENTAL SERVICES-0.74%
Stericycle, Inc.(a)(b) 291,600 13,399,020
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.84%
Scotts Co. (The)-Class A(a) 207,100 15,225,992
===========================================================================
FOOD DISTRIBUTORS-0.87%
United Natural Foods, Inc.(a)(b) 505,300 15,714,830
===========================================================================
HEALTH CARE EQUIPMENT-6.03%
American Medical Systems Holdings, Inc.(a) 362,300 15,147,763
---------------------------------------------------------------------------
Closure Medical Corp.(a) 328,500 6,405,750
---------------------------------------------------------------------------
Integra LifeSciences Holdings(a) 400,300 14,783,079
---------------------------------------------------------------------------
Intuitive Surgical, Inc.(a) 381,000 15,247,620
---------------------------------------------------------------------------
Mentor Corp.(b) 437,200 14,751,128
---------------------------------------------------------------------------
NuVasive, Inc.(a) 454,800 4,661,700
---------------------------------------------------------------------------
ResMed Inc.(a)(b) 191,100 9,765,210
---------------------------------------------------------------------------
Varian Inc.(a) 305,200 12,516,252
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-(CONTINUED)
VNUS Medical Technologies, Inc.(a) 120,412 $ 1,627,970
---------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 511,500 14,577,750
===========================================================================
109,484,222
===========================================================================
HEALTH CARE FACILITIES-2.01%
AmSurg Corp.(a)(b) 355,450 10,499,993
---------------------------------------------------------------------------
LifePoint Hospitals, Inc.(a) 398,500 13,875,770
---------------------------------------------------------------------------
VCA Antech, Inc.(a)(b) 617,600 12,104,960
===========================================================================
36,480,723
===========================================================================
HEALTH CARE SERVICES-4.66%
Accredo Health, Inc.(a) 521,500 14,455,980
---------------------------------------------------------------------------
Advisory Board Co. (The)(a)(b) 200,000 7,376,000
---------------------------------------------------------------------------
American Healthways, Inc.(a)(b) 249,100 8,230,264
---------------------------------------------------------------------------
Cerner Corp.(a)(b) 305,600 16,248,752
---------------------------------------------------------------------------
Covance Inc.(a)(b) 250,000 9,687,500
---------------------------------------------------------------------------
ICON PLC-ADR (Ireland)(a)(b) 241,500 9,333,975
---------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 145,600 9,325,680
---------------------------------------------------------------------------
Renal Care Group, Inc.(a) 273,600 9,846,864
===========================================================================
84,505,015
===========================================================================
HEALTH CARE SUPPLIES-0.83%
Immucor, Inc.(a) 642,844 15,138,976
===========================================================================
HOME ENTERTAINMENT SOFTWARE-0.78%
Activision, Inc.(a) 704,300 14,212,774
===========================================================================
HOMEBUILDING-1.02%
Beazer Homes USA, Inc.(b) 126,400 18,480,944
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.36%
Choice Hotels International, Inc. 238,400 13,827,200
---------------------------------------------------------------------------
Kerzner International Ltd. (Bahamas)(a) 179,400 10,772,970
===========================================================================
24,600,170
===========================================================================
INDUSTRIAL MACHINERY-2.55%
Actuant Corp.-Class A(a) 219,100 11,426,065
---------------------------------------------------------------------------
Graco Inc.(b) 267,600 9,994,860
---------------------------------------------------------------------------
IDEX Corp. 263,500 10,671,750
---------------------------------------------------------------------------
JLG Industries, Inc. 721,200 14,157,156
===========================================================================
46,249,831
===========================================================================
INTERNET SOFTWARE & SERVICES-1.88%
Digital River, Inc.(a) 176,900 7,360,809
---------------------------------------------------------------------------
SINA Corp. (Cayman Islands)(a)(b) 212,200 6,803,132
---------------------------------------------------------------------------
Websense, Inc.(a)(b) 391,600 19,861,952
===========================================================================
34,025,893
===========================================================================
|
FS-105
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-0.94%
Jefferies Group, Inc.(b) 241,500 $ 9,727,620
---------------------------------------------------------------------------
Piper Jaffray Cos., Inc.(a)(b) 151,600 7,269,220
===========================================================================
16,996,840
===========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-1.54%
iShares Nasdaq Biotechnology Index Fund(a)(b) 371,800 28,033,720
===========================================================================
IT CONSULTING & OTHER SERVICES-1.96%
Anteon International Corp.(a) 346,600 14,508,676
---------------------------------------------------------------------------
CACI International Inc.-Class A(a)(b) 133,600 9,102,168
---------------------------------------------------------------------------
MPS Group, Inc.(a)(b) 974,900 11,952,274
===========================================================================
35,563,118
===========================================================================
LEISURE PRODUCTS-1.97%
Marvel Enterprises, Inc.(a) 575,800 11,792,384
---------------------------------------------------------------------------
Nautilus Group, Inc. (The)(b) 615,500 14,876,635
---------------------------------------------------------------------------
RC2 Corp.(a) 278,000 9,062,800
===========================================================================
35,731,819
===========================================================================
MARINE-0.42%
Kirby Corp.(a) 172,200 7,642,236
===========================================================================
MOVIES & ENTERTAINMENT-1.29%
Imax Corp. (Canada)(a)(b) 1,017,100 8,390,058
---------------------------------------------------------------------------
Lions Gate Entertainment Corp. (Canada)(a)(b) 1,414,900 15,026,238
===========================================================================
23,416,296
===========================================================================
MULTI-LINE INSURANCE-0.51%
HCC Insurance Holdings, Inc. 280,400 9,286,848
===========================================================================
OIL & GAS DRILLING-1.71%
Grey Wolf, Inc.(a)(b) 1,549,000 8,163,230
---------------------------------------------------------------------------
Patterson-UTI Energy, Inc. 475,400 9,246,530
---------------------------------------------------------------------------
Unit Corp.(a) 355,100 13,568,371
===========================================================================
30,978,131
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-1.84%
Cal Dive International, Inc(a) 340,800 13,887,600
---------------------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 277,900 6,488,965
---------------------------------------------------------------------------
FMC Technologies, Inc.(a)(b) 402,500 12,960,500
===========================================================================
33,337,065
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.25%
Harvest Natural Resources, Inc.(a) 549,200 9,484,684
---------------------------------------------------------------------------
Quicksilver Resources Inc.(a)(b) 313,700 11,537,886
---------------------------------------------------------------------------
Range Resources Corp. 85,200 1,743,192
===========================================================================
22,765,762
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
PHARMACEUTICALS-1.56%
First Horizon Pharmaceutical Corp.(a) 563,800 $ 12,905,382
---------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A 71,200 2,499,832
---------------------------------------------------------------------------
MGI Pharma, Inc.(a)(b) 463,700 12,988,237
===========================================================================
28,393,451
===========================================================================
PROPERTY & CASUALTY INSURANCE-0.89%
Assured Guaranty Ltd. (Bermuda) 328,500 6,461,595
---------------------------------------------------------------------------
ProAssurance Corp.(a)(b) 245,800 9,613,238
===========================================================================
16,074,833
===========================================================================
REGIONAL BANKS-4.14%
East West Bancorp, Inc. 363,800 15,265,048
---------------------------------------------------------------------------
PrivateBancorp, Inc.(b) 316,800 10,210,464
---------------------------------------------------------------------------
Silicon Valley Bancshares(a)(b) 329,100 14,750,262
---------------------------------------------------------------------------
Southwest Bancorp. of Texas, Inc. 601,400 14,006,606
---------------------------------------------------------------------------
Texas Regional Bancshares, Inc.-Class A 276,200 9,026,216
---------------------------------------------------------------------------
UCBH Holdings, Inc. 259,000 11,867,380
===========================================================================
75,125,976
===========================================================================
RESTAURANTS-3.37%
P.F. Chang's China Bistro, Inc.(a)(b) 294,900 16,617,615
---------------------------------------------------------------------------
Panera Bread Co.-Class A(a)(b) 339,300 13,680,576
---------------------------------------------------------------------------
RARE Hospitality International, Inc.(a)(b) 470,400 14,986,944
---------------------------------------------------------------------------
Sonic Corp.(a)(b) 519,800 15,853,900
===========================================================================
61,139,035
===========================================================================
SEMICONDUCTOR EQUIPMENT-2.25%
Cymer, Inc.(a)(b) 466,200 13,771,548
---------------------------------------------------------------------------
FEI Co.(a)(b) 305,100 6,407,100
---------------------------------------------------------------------------
FormFactor Inc.(a) 511,000 13,868,540
---------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc.(a)(b) 184,600 6,802,510
===========================================================================
40,849,698
===========================================================================
SEMICONDUCTORS-3.42%
ARM Holdings PLC-ADR (United Kingdom) 2,247,845 13,869,204
---------------------------------------------------------------------------
Integrated Circuit Systems, Inc.(a)(b) 264,200 5,527,064
---------------------------------------------------------------------------
Microsemi Corp.(a)(b) 1,028,452 17,853,927
---------------------------------------------------------------------------
Pixelworks, Inc.(a)(b) 518,400 5,878,656
---------------------------------------------------------------------------
Power Integrations, Inc.(a)(b) 233,200 4,612,696
---------------------------------------------------------------------------
Semtech Corp.(a)(b) 656,700 14,362,029
===========================================================================
62,103,576
===========================================================================
SPECIALTY STORES-2.09%
Guitar Center, Inc.(a) 280,400 14,774,276
---------------------------------------------------------------------------
Regis Corp. 303,600 14,011,140
---------------------------------------------------------------------------
Steiner Leisure Ltd. (Bahamas)(a) 303,200 9,059,616
===========================================================================
37,845,032
===========================================================================
|
FS-106
MARKET
SHARES VALUE
---------------------------------------------------------------------------
STEEL-1.60%
Cleveland-Cliffs Inc.(b) 145,500 $ 15,111,630
---------------------------------------------------------------------------
Steel Dynamics, Inc. 365,900 13,860,292
===========================================================================
28,971,922
===========================================================================
SYSTEMS SOFTWARE-1.57%
Internet Security Systems, Inc.(a) 647,050 15,043,913
---------------------------------------------------------------------------
Macrovision Corp.(a) 522,500 13,438,700
===========================================================================
28,482,613
===========================================================================
TECHNOLOGY DISTRIBUTORS-0.66%
ScanSource, Inc.(a) 192,000 11,934,720
===========================================================================
THRIFTS & MORTGAGE FINANCE-0.39%
W Holding Co., Inc. (Puerto Rico) 309,264 7,094,516
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-1.64%
Hughes Supply, Inc. 411,900 13,324,965
---------------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class A(b) 454,800 16,363,704
===========================================================================
29,688,669
===========================================================================
TRUCKING-1.66%
Heartland Express, Inc. 458,400 10,300,248
---------------------------------------------------------------------------
Knight Transportation, Inc.(b) 377,200 9,354,560
---------------------------------------------------------------------------
Old Dominion Freight Line, Inc.(a) 302,800 $ 10,537,440
===========================================================================
30,192,248
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,317,257,929) 1,781,664,709
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
MONEY MARKET FUNDS-1.42%
Liquid Assets Portfolio-Institutional
Class(c) 12,837,129 12,837,129
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 12,837,129 12,837,129
===========================================================================
Total Money Market Funds (Cost
$25,674,258) 25,674,258
===========================================================================
TOTAL INVESTMENTS-99.62% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,342,932,187) 1,807,338,967
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-22.69%
Liquid Assets Portfolio-Institutional
Class(c)(d) 205,833,934 205,833,934
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(c)(d) 205,833,935 205,833,935
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $411,667,869) 411,667,869
===========================================================================
TOTAL INVESTMENTS--122.31% (Cost
$1,754,600,056) 2,219,006,836
===========================================================================
OTHER ASSETS LESS LIABILITIES-(22.31%) (404,708,764)
===========================================================================
NET ASSETS-100.00% $1,814,298,072
___________________________________________________________________________
===========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at December 31, 2004.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-107
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2004
ASSETS:
Investments, at market value (cost
$1,317,257,929)* $1,781,664,709
------------------------------------------------------------
Investments in affiliated money market funds
(cost $437,342,127) 437,342,127
============================================================
Total investments (cost $1,754,600,056) 2,219,006,836
============================================================
Cash 1,118,587
------------------------------------------------------------
Receivables for:
Investments sold 23,931,419
------------------------------------------------------------
Fund shares sold 2,528,979
------------------------------------------------------------
Dividends 336,524
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 48,410
------------------------------------------------------------
Other assets 47,256
============================================================
Total assets 2,247,018,011
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 5,977,605
------------------------------------------------------------
Fund shares reacquired 13,448,836
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 93,833
------------------------------------------------------------
Collateral upon return of securities
loaned 411,667,869
------------------------------------------------------------
Accrued distribution fees 654,165
------------------------------------------------------------
Accrued transfer agent fees 753,872
------------------------------------------------------------
Accrued operating expenses 123,759
============================================================
Total liabilities 432,719,939
============================================================
Net assets applicable to shares outstanding $1,814,298,072
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,463,971,511
------------------------------------------------------------
Undistributed net investment income (loss) (66,642)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (114,013,577)
------------------------------------------------------------
Unrealized appreciation of investment
securities 464,406,780
============================================================
$1,814,298,072
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,491,940,207
____________________________________________________________
============================================================
Class B $ 149,400,330
____________________________________________________________
============================================================
Class C $ 40,904,197
____________________________________________________________
============================================================
Class R $ 19,506,312
____________________________________________________________
============================================================
Institutional Class $ 112,547,026
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 54,323,875
____________________________________________________________
============================================================
Class B 5,834,250
____________________________________________________________
============================================================
Class C 1,598,124
____________________________________________________________
============================================================
Class R 714,984
____________________________________________________________
============================================================
Institutional Class 4,043,911
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 27.46
------------------------------------------------------------
Offering price per share:
(Net asset value of $27.46 divided by
94.50%) $ 29.06
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 25.61
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 25.60
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 27.28
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 27.83
____________________________________________________________
============================================================
|
* At December 31, 2004, securities with an aggregate market value of $401,861,770 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-108
STATEMENT OF OPERATIONS
For the year ended December 31, 2004
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $3,874) $ 2,459,439
--------------------------------------------------------------------------
Dividends from affiliated money market funds (including
securities lending income of $1,647,312*) 2,814,626
--------------------------------------------------------------------------
Interest 26,067
==========================================================================
Total investment income 5,300,132
==========================================================================
EXPENSES:
Advisory fees 13,134,333
--------------------------------------------------------------------------
Administrative services fees 437,687
--------------------------------------------------------------------------
Custodian fees 221,205
--------------------------------------------------------------------------
Distribution fees:
Class A 5,494,140
--------------------------------------------------------------------------
Class B 1,619,722
--------------------------------------------------------------------------
Class C 442,711
--------------------------------------------------------------------------
Class R 70,406
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 7,012,833
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 108,068
--------------------------------------------------------------------------
Trustees' fees and retirement benefits 63,744
--------------------------------------------------------------------------
Other 826,209
==========================================================================
Total expenses 29,431,058
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (1,818,806)
==========================================================================
Net expenses 27,612,252
==========================================================================
Net investment income (loss) (22,312,120)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FUTURES CONTRACTS AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 139,099,401
--------------------------------------------------------------------------
Futures contracts 3,221,283
--------------------------------------------------------------------------
Option contracts written 1,450,816
==========================================================================
143,771,500
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (18,993,996)
--------------------------------------------------------------------------
Futures contracts (396,045)
--------------------------------------------------------------------------
Option contracts written (160,935)
==========================================================================
(19,550,976)
==========================================================================
Net gain from investment securities, futures contracts and
option contracts 124,220,524
==========================================================================
Net increase in net assets resulting from operations $101,908,404
__________________________________________________________________________
==========================================================================
|
* Dividends from affiliated money market funds are net of income rebate paid to securities lending counterparties.
See accompanying notes which are an integral part of the financial statements.
FS-109
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 2004 and 2003
2004 2003
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (22,312,120) $ (15,248,461)
----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
futures contracts and option contracts 143,771,500 (29,706,227)
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, futures contracts and option
contracts (19,550,976) 528,393,585
==============================================================================================
Net increase in net assets resulting from operations 101,908,404 483,438,897
==============================================================================================
Share transactions-net:
Class A (192,987,130) 413,411,002
----------------------------------------------------------------------------------------------
Class B (41,206,105) (22,623,106)
----------------------------------------------------------------------------------------------
Class C (11,365,203) (6,128,935)
----------------------------------------------------------------------------------------------
Class R 9,247,057 6,293,596
----------------------------------------------------------------------------------------------
Institutional Class (3,899,271) 89,071,755
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (240,210,652) 480,024,312
==============================================================================================
Net increase (decrease) in net assets (138,302,248) 963,463,209
==============================================================================================
NET ASSETS:
Beginning of year 1,952,600,320 989,137,111
==============================================================================================
End of year (including undistributed net investment income
(loss) of $(66,642) and $(28,833), respectively) $1,814,298,072 $1,952,600,320
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-110
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seven 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. Effective as of the close of business on March 18, 2002, the Fund's shares were offered on a limited basis to certain investors.
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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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-111
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
G. 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.
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 0.725% on the first $500 million of the Fund's average daily net assets, plus 0.70% on the next $500 million of the Fund's average daily net assets, plus 0.675% on the next $500 million of the Fund's average daily net assets, plus 0.65% on the Fund's average daily net assets 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). Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors. For the year ended December 31, 2004, AIM waived fees of $26,987.
For the year ended December 31, 2004, at the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $196,996 of expenses incurred by the Fund in connection with matters related to recently settled regulatory actions and investigations concerning market timing activity
FS-112
in the AIM Funds, including legal, audit, shareholder servicing, communication and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations.
The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services to the Fund. For the year ended December 31, 2004, AIM was paid $437,687 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. For the Institutional Class, the transfer agent has contractually agreed to reimburse class specific transfer agent fees and expenses to the extent necessary to limit transfer agent fees to 0.10% of the average net assets. AISI did not reimburse fees during the period under this expense limitation. For the year ended December 31, 2004, the Fund paid AISI $7,012,833 for Class A, Class B, Class C and Class R shares and $108,068 for Institutional Class shares. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking 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, 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. During the periods the Fund is offered on a limited basis, AIM Distributors has agreed to waive Class A distribution plan fees equal to 0.10% of the average daily net assets of Class A shares. Pursuant to the Plans, for the year ended December 31, 2004, the Class A, Class B, Class C and Class R shares paid $3,924,386, $1,619,722, $442,711 and $70,406, respectively, after AIM Distributors waived Plan fees of $1,569,754 for Class A shares.
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 year ended December 31, 2004, AIM Distributors advised the Fund that it retained $41,724 in front-end sales commissions from the sale of Class A shares and $6,044, $15,985, $2,627 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--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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the year ended December 31, 2004.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 84,830,758 $ 332,236,523 $ (404,230,152) $ -- $ 12,837,129 $ 591,781 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 84,830,758 332,236,523 (404,230,152) -- 12,837,129 575,533 --
===================================================================================================================================
Subtotal $169,661,516 $ 664,473,046 $ (808,460,304) $ -- $ 25,674,258 $1,167,314 $ --
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/03 AT COST FROM SALES (DEPRECIATION) 12/31/04 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $211,081,067 $ 329,924,652 $ (335,171,785) $ -- $205,833,934 $ 830,048 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 211,081,067 329,386,289 (334,633,421) -- 205,833,935 817,264 --
===================================================================================================================================
Subtotal $422,162,134 $ 659,310,941 $ (669,805,206) $ -- $411,667,869 $1,647,312 $ --
===================================================================================================================================
Total $591,823,650 $1,323,783,987 $(1,478,265,510) $ -- $437,342,127 $2,814,626 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Dividend income is net of income rebate paid to securities lending counterparties.
FS-113
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures each transaction is effected at the current market price. Pursuant to these procedures, during the year ended December 31, 2004, the Fund engaged in purchases and sales of securities of $16,523,190 and $28,686,347, respectively.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the year ended December 31, 2004, the Fund received credits in transfer agency fees of $23,112 and credits in custodian fees of $1,957 under expense offset arrangements, which resulted in a reduction of the Fund's total expenses of $25,069.
NOTE 6--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. Those Trustees who defer 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. 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 year ended December 31, 2004, the Fund paid legal fees of $7,300 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 year ended December 31, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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.
FS-114
At December 31, 2004, securities with an aggregate value of $401,861,770 were on loan to brokers. The loans were secured by cash collateral of $411,667,869 received by the Fund and subsequently invested in affiliated money market funds. For the year ended December 31, 2004, the Fund received dividends on cash collateral net of income rebate paid to counterparties of $1,647,312 for securities lending transactions.
NOTE 9--OPTION CONTRACTS WRITTEN
TRANSACTIONS DURING THE PERIOD
--------------------------------------------------------------------------------------
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------------------------------------------------------------------------------------
Beginning of year 2,430 $ 330,885
--------------------------------------------------------------------------------------
Written 31,826 3,538,860
--------------------------------------------------------------------------------------
Closed (6,421) (957,208)
--------------------------------------------------------------------------------------
Exercised (21,143) (2,001,374)
--------------------------------------------------------------------------------------
Expired (6,692) (911,163)
======================================================================================
End of year -- $ --
______________________________________________________________________________________
======================================================================================
|
NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
DISTRIBUTIONS OF SHAREHOLDERS:
There were no ordinary income & long term capital distributions paid during the years ended December, 2004 and 2003.
TAX COMPONENTS OF NET ASSETS:
As of December 31, 2004, the components of net assets on a tax basis were as follows:
2004
----------------------------------------------------------------------------
Unrealized appreciation -- investments $ 463,808,860
----------------------------------------------------------------------------
Temporary book/tax differences (66,642)
----------------------------------------------------------------------------
Capital loss carryforward (113,415,657)
----------------------------------------------------------------------------
Shares of beneficial interest 1,463,971,511
============================================================================
Total net assets $1,814,298,072
____________________________________________________________________________
============================================================================
|
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is due to differences in the timing of recognition of gains and losses on investments for tax and book purposes. The Fund's unrealized appreciation (depreciation) difference is attributable primarily to 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 trustee deferral of compensation and retirement plan expenses.
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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund utilized $137,224,987 of capital loss carryforward in the current period to offset net realized capital gain for federal income tax purposes. The Fund has a capital loss carryforward as of December 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
---------------------------------------------------------------------------
December 31, 2010 $ 73,388,721
---------------------------------------------------------------------------
December 31, 2011 40,026,936
===========================================================================
Total capital loss carryforward $113,415,657
___________________________________________________________________________
===========================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-115
NOTE 11--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 December 31, 2004 was $1,244,219,069 and $1,375,084,416, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $481,823,360 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (18,014,500) ============================================================================== Net unrealized appreciation of investment securities $463,808,860 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,755,197,976. |
NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES
Primarily as a result of differing book/tax treatment of net operating losses, on December 31, 2004, undistributed net investment income was increased by $22,274,311, and shares of beneficial interest decreased by $22,274,311. This reclassification had no effect on the net assets of the Fund.
NOTE 13--SHARE INFORMATION
The Fund currently consists of 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 and Institutional Class shares are sold at net asset value. Under certain 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(a)
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2004 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 24,314,386 $ 628,943,607 44,350,453 $ 956,041,602
--------------------------------------------------------------------------------------------------------------------------
Class B 287,423 6,942,558 539,006 10,928,150
--------------------------------------------------------------------------------------------------------------------------
Class C 266,409 6,403,144 417,319 8,478,871
--------------------------------------------------------------------------------------------------------------------------
Class R 553,344 14,127,974 327,479 7,328,256
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,807,401 46,669,980 4,738,755 105,874,188
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 267,852 6,898,694 198,401 4,346,224
--------------------------------------------------------------------------------------------------------------------------
Class B (286,124) (6,898,694) (210,505) (4,346,224)
==========================================================================================================================
Reacquired:
Class A (32,593,314) (828,829,431) (25,018,347) (546,976,824)
--------------------------------------------------------------------------------------------------------------------------
Class B (1,739,802) (41,249,969) (1,490,295) (29,205,032)
--------------------------------------------------------------------------------------------------------------------------
Class C (740,566) (17,768,347) (730,852) (14,607,806)
--------------------------------------------------------------------------------------------------------------------------
Class R (190,940) (4,880,917) (45,477) (1,034,660)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,936,260) (50,569,251) (720,702) (16,802,433)
==========================================================================================================================
(9,990,191) $(240,210,652) 22,355,235 $ 480,024,312
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 18% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-116
NOTE 14--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the periods indicated.
CLASS A
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.71 $ 18.47 $ 25.67 $ 29.81 $ 31.87
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.32) (0.21)(a) (0.19)(a) (0.18)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 2.07 7.45 (7.01) (3.93) (0.12)
=================================================================================================================================
Total from investment operations 1.75 7.24 (7.20) (4.11) (0.25)
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 27.46 $ 25.71 $ 18.47 $ 25.67 $ 29.81
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.81% 39.20% (28.05)% (13.79)% (0.74)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,491,940 $1,602,724 $790,700 $679,104 $566,458
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.40%(c) 1.27% 1.35% 1.31% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.51%(c) 1.37% 1.43% 1.39% 1.23%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.12)(c) (0.98)% (0.91)% (0.70)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average net assets of $1,569,754,408.
CLASS B
-----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.15 $ 17.49 $ 24.48 $ 28.64 $ 30.92
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.40)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.98 7.01 (6.66) (3.78) (0.07)
=================================================================================================================================
Total from investment operations 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.61 $ 24.15 $ 17.49 $ 24.48 $ 28.64
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.05% 38.08% (28.55)% (14.42)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $149,400 $182,700 $152,577 $212,958 $231,293
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.15%(c) 2.02% 2.08% 2.03% 1.88%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.16%(c) 2.02% 2.08% 2.04% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (1.87)%(c) (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $161,972,181.
FS-117
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
CLASS C
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.14 $ 17.48 $ 24.47 $ 28.63 $ 30.91
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.39)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.98 7.01 (6.66) (3.78) (0.08)
=================================================================================================================================
Total from investment operations 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.60 $ 24.14 $ 17.48 $ 24.47 $ 28.63
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 6.05% 38.10% (28.57)% (14.43)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $40,904 $50,031 $41,693 $46,833 $41,738
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 2.15%(c) 2.02% 2.08% 2.03% 1.88%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 2.16%(c) 2.02% 2.08% 2.04% 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to average net
assets (1.87)%(c) (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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.
(c) Ratios are based on average daily net assets of $44,271,092.
CLASS R
-------------------------------------------------
JUNE 30, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
--------------------------- DECEMBER 31,
2004 2003 2002
---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.61 $18.44 $ 22.64
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.27) (0.28)(a) (0.13)(a)
---------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.94 7.45 (4.07)
===============================================================================================================
Total from investment operations 1.67 7.17 (4.20)
===============================================================================================================
Net asset value, end of period $ 27.28 $25.61 $ 18.44
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(b) 6.52% 38.88% (18.55)%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $19,506 $9,029 $ 1,301
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.65%(c) 1.52% 1.61%(d)
---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.66%(c) 1.52% 1.61%(d)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (1.37)%(c) (1.23)% (1.17)%(d)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(e) 69% 32% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $14,081,118.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-118
NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------
MARCH 15, 2002
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
------------------------------ DECEMBER 31,
2004 2003 2002
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.91 $ 18.53 $ 24.61
-------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.16) (0.12)(a) (0.07)(a)
-------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.08 7.50 (6.01)
===================================================================================================================
Total from investment operations 1.92 7.38 (6.08)
===================================================================================================================
Net asset value, end of period $ 27.83 $ 25.91 $ 18.53
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) 7.41% 39.83% (24.71)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $112,547 $108,116 $ 2,866
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.85%(c) 0.80% 0.89%(d)
-------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.86%(c) 0.80% 0.89%(d)
===================================================================================================================
Ratio of net investment income (loss) to average net assets (0.57)%(c) (0.51)% (0.45)%(d)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate(e) 69% 32% 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. Not annualized for periods less than one year.
(c) Ratios are based on average daily net assets of $115,203,195.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 15--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
Settled Enforcement Actions and Investigations Related to Market Timing
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's investment advisor) reached final settlements with certain regulators, including without limitation the Securities and Exchange Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve civil enforcement actions and investigations related to market timing activity and related issues in the AIM Funds, including those formerly advised by IFG. These regulators alleged, in substance, that IFG and AIM failed to disclose in the prospectuses for the AIM Funds that they advised and to the independent directors/trustees of such Funds that they had entered into certain arrangements permitting market timing of such Funds, thereby breaching their fiduciary duties to such Funds. As a result of the foregoing, the regulators alleged that IFG and AIM breached various Federal and state securities, business and consumer protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached a final settlement with the SEC to resolve an investigation relating to market timing activity and related issues in the AIM Funds. The SEC also alleged that ADI violated various Federal securities laws. The SEC also has settled related market timing enforcement actions brought against certain former officers and employees of IFG.
Under the terms of the settlements, IFG agreed to pay a total of $325 million, of which $110 million is civil penalties. Of this $325 million total payment, half has been paid and the remaining half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is civil penalties, all of which has been paid. The entire $325 million IFG settlement payment will be made available for distribution to the shareholders of those AIM Funds that IFG formerly advised that were harmed by market timing activity, and the entire $50 million settlement payment by AIM and ADI will be made available for distribution to the shareholders of those AIM Funds advised by AIM that were harmed by market timing activity, all as to be determined by an independent distribution consultant. The settlement payments will be distributed in accordance with a methodology to be determined by the independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. Under the settlements with the NYAG and COAG, AIM has agreed to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004, and not to increase certain management fees.
Under the terms of the settlements, AIM will make certain governance and compliance reforms, including maintaining an internal controls committee and retaining an independent compliance consultant and a corporate ombudsman. Also, commencing in 2007 and at least once every other year
FS-119
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
thereafter, AIM will undergo a compliance review by an independent third party. In addition, under the terms of the settlements, AIM has undertaken to cause the AIM Funds to operate in accordance with certain governance policies and practices, including retaining a full-time independent senior officer whose duties will include monitoring compliance and managing the process by which proposed management fees to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than every fifth calendar year thereafter, the AIM Funds will hold shareholder meetings at which their Boards of Trustees will be elected.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to pay expenses incurred by such Funds related to market timing matters.
The SEC has also settled market timing enforcement actions against Raymond R. Cunningham (the former president and chief executive officer of IFG and a former member of the board of directors of the AIM Funds formerly advised by IFG), Timothy J. Miller (the former chief investment officer and a former portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales department). As part of these settlements, the SEC ordered these individuals to pay restitution and civil penalties in various amounts and prohibited them from associating with, or serving as an officer or director of, an investment advisor, broker, dealer and/or investment company, as applicable, for certain periods of time.
The payments made in connection with the above-referenced settlements by IFG, AIM and ADI will total approximately $375 million (not including AIM's agreement to reduce management fees on certain equity and balanced AIM Funds by $15 million per year for the next five years, based upon effective fee rates and assets under management as of July 1, 2004). The manner in which the settlement payments will be distributed is unknown at the present time and will be determined by an independent distribution consultant appointed under the settlement agreements. Therefore, management of AIM and the Fund are unable at the present time to estimate the impact, if any, that the distribution of the settlement payments may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described below may have on AIM, ADI or the Fund.
Regulatory Inquiries and Pending Litigation
The mutual fund industry as a whole is currently subject to regulatory inquiries 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 but not limited to revenue sharing and directed-brokerage arrangements, investments in securities of other registered investment companies, contractual plans, issues related to Section 529 college savings plans, procedures for locating lost security holders and participation in class action settlements.
As described more fully below, IFG and AIM are the subject of a number of ongoing regulatory inquiries and civil lawsuits related to one or more of the issues currently being scrutinized by various Federal and state regulators, including but not limited to those issues described above. Additional regulatory actions and/or civil lawsuits related to the above or other issues may be filed against the AIM 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 Funds, IFG, AIM and/or related entities and individuals in the future.
Ongoing Regulatory Inquiries Concerning IFG and AIM
IFG, certain related entities, certain of their current and former officers and/or certain of the AIM Funds formerly advised by IFG 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 such 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 SEC, the NASD, Inc. ("NASD"), the Florida Department of Financial Services, 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. 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 of the AIM Funds formerly advised by IFG. IFG is providing full cooperation with respect to these inquiries.
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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. These regulators include the SEC, the NASD, the Department of Banking for the State of Connecticut, 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 SEC, the NASD, 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, the U.S. Postal Inspection Service and the Commodity Futures Trading Commission, some of which concern one or more AIM Funds. AIM is providing full cooperation with respect to these inquiries.
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
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 AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties) making allegations that are similar in many respects to those in the settled regulatory actions brought by the SEC, the NYAG and the COAG concerning market timing activity in the AIM Funds. 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 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; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The plaintiffs in one of the underlying lawsuits continue to seek remand of their lawsuit 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 AIM Funds, IFG and/or AIM)
alleging that certain AIM 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.
Private Civil Actions Alleging Excessive Advisory and/or 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"), ADI and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the defendants charged excessive advisory and/or 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 Federal 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. 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 has challenged this order.
Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited Offering Funds or Share Classes
Multiple civil lawsuits, including shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds) 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 Federal courts and seek such remedies as damages; injunctive relief; and attorneys' and experts' fees.
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 Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM 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.
Private Civil Action Alleging Failure to Ensure Participation in Class Action Settlements
A civil lawsuit, purporting to be a class action lawsuit, has been filed against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM Funds alleging that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which the AIM Funds were eligible to participate. This lawsuit alleges as theories of recovery: (i) violation of various provisions of the Federal securities laws;
FS-121
NOTE 15--LEGAL PROCEEDINGS (CONTINUED)
As a result of the matters discussed above, investors in the AIM 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.
FS-122
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.31%
ADVERTISING-4.66%
Interpublic Group of Cos., Inc. (The)(a)(b) 12,182,700 $ 148,385,286
---------------------------------------------------------------------------
Omnicom Group Inc. 2,040,000 162,914,400
===========================================================================
311,299,686
===========================================================================
AEROSPACE & DEFENSE-1.17%
Honeywell International Inc. 2,131,300 78,069,519
===========================================================================
APPAREL RETAIL-1.84%
Gap, Inc. (The)(b) 6,232,300 123,087,925
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-2.19%
Bank of New York Co., Inc. (The) 5,085,000 146,346,300
===========================================================================
BREWERS-0.83%
Molson Coors Brewing Co.-Class B(b) 893,700 55,409,400
===========================================================================
BUILDING PRODUCTS-4.16%
American Standard Cos. Inc. 3,732,000 156,445,440
---------------------------------------------------------------------------
Masco Corp.(b) 3,823,800 121,443,888
===========================================================================
277,889,328
===========================================================================
COMMUNICATIONS EQUIPMENT-0.52%
Motorola, Inc. 1,896,600 34,631,916
===========================================================================
COMPUTER STORAGE & PERIPHERALS-0.75%
Lexmark International, Inc.-Class A(a) 773,000 50,113,590
===========================================================================
CONSUMER ELECTRONICS-1.26%
Koninklijke (Royal) Philips Electronics N.V.-
New York Shares (Netherlands) 3,333,098 83,960,739
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-4.77%
Ceridian Corp.(a)(b) 6,071,300 118,268,924
---------------------------------------------------------------------------
First Data Corp. 5,001,000 200,740,140
===========================================================================
319,009,064
===========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.42%
Cendant Corp. 7,235,000 161,846,950
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-2.72%
Waste Management, Inc. 6,422,167 182,004,213
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
FOOD RETAIL-3.26%
Kroger Co. (The)(a)(b) 7,161,400 $ 136,281,442
---------------------------------------------------------------------------
Safeway Inc.(b) 3,605,000 81,436,950
===========================================================================
217,718,392
===========================================================================
GENERAL MERCHANDISE STORES-1.94%
Target Corp.(b) 2,379,300 129,457,713
===========================================================================
HEALTH CARE DISTRIBUTORS-7.16%
Cardinal Health, Inc.(b) 4,729,000 272,295,820
---------------------------------------------------------------------------
McKesson Corp. 4,606,900 206,343,051
===========================================================================
478,638,871
===========================================================================
HEALTH CARE EQUIPMENT-1.94%
Waters Corp.(a) 3,487,100 129,615,507
===========================================================================
HEALTH CARE FACILITIES-2.41%
HCA Inc. 2,844,000 161,169,480
===========================================================================
INDUSTRIAL CONGLOMERATES-3.79%
Tyco International Ltd. (Bermuda)(b) 8,667,000 253,076,400
===========================================================================
INDUSTRIAL MACHINERY-1.08%
Parker Hannifin Corp. 1,159,200 71,881,992
===========================================================================
INVESTMENT BANKING & BROKERAGE-4.23%
Merrill Lynch & Co., Inc. 2,447,000 134,609,470
---------------------------------------------------------------------------
Morgan Stanley 2,816,900 147,802,743
===========================================================================
282,412,213
===========================================================================
LEISURE PRODUCTS-0.42%
Mattel, Inc.(b) 1,536,460 28,117,218
===========================================================================
MANAGED HEALTH CARE-3.51%
UnitedHealth Group Inc. 4,498,800 234,567,432
===========================================================================
MOVIES & ENTERTAINMENT-2.23%
Walt Disney Co. (The) 5,925,000 149,191,500
===========================================================================
MULTI-LINE INSURANCE-2.03%
Genworth Financial Inc.-Class A 4,479,400 135,412,262
===========================================================================
OIL & GAS DRILLING-2.84%
ENSCO International Inc. 1,093,700 39,099,775
---------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a) 2,789,598 150,554,604
===========================================================================
189,654,379
===========================================================================
|
FS-123
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-4.54%
Halliburton Co.(b) 4,200,000 $ 200,844,000
---------------------------------------------------------------------------
Weatherford International Ltd. (Bermuda)(a) 1,767,300 102,468,054
===========================================================================
303,312,054
===========================================================================
OTHER DIVERSIFIED FINANCIAL SERVICES-5.69%
Citigroup Inc. 3,859,597 178,429,169
---------------------------------------------------------------------------
JPMorgan Chase & Co. 5,723,360 202,149,075
===========================================================================
380,578,244
===========================================================================
PACKAGED FOODS & MEATS-1.55%
Unilever N.V. (Netherlands)(c) 1,605,000 103,951,112
===========================================================================
PHARMACEUTICALS-8.23%
Pfizer Inc. 6,100,300 168,246,274
---------------------------------------------------------------------------
Sanofi-Aventis (France)(c) 2,973,760 243,554,381
---------------------------------------------------------------------------
Wyeth(b) 3,110,000 138,395,000
===========================================================================
550,195,655
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.28%
ACE Ltd. (Cayman Islands)(b) 3,397,000 152,355,450
===========================================================================
SEMICONDUCTOR EQUIPMENT-1.05%
Novellus Systems, Inc.(a)(b) 2,834,000 70,028,140
===========================================================================
SPECIALIZED CONSUMER SERVICES-2.02%
H&R Block, Inc.(b) 2,310,400 134,811,840
===========================================================================
SYSTEMS SOFTWARE-3.41%
Computer Associates International, Inc.(b) 8,293,047 227,892,932
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-5.41%
Fannie Mae(b) 3,540,000 $ 206,736,000
---------------------------------------------------------------------------
MGIC Investment Corp.(b) 1,234,100 80,488,002
---------------------------------------------------------------------------
Radian Group Inc. 1,578,856 74,553,580
===========================================================================
361,777,582
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $5,222,431,546) 6,569,484,998
===========================================================================
MONEY MARKET FUNDS-1.86%
Liquid Assets Portfolio-Institutional
Class(d) 62,024,340 62,024,340
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 62,024,340 62,024,340
===========================================================================
Total Money Market Funds (Cost
$124,048,680) 124,048,680
===========================================================================
TOTAL INVESTMENTS-100.17% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$5,346,480,226) 6,693,533,678
===========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-12.99%
Liquid Assets Portfolio-Institutional
Class(d)(e) 434,113,793 434,113,793
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 434,113,793 434,113,793
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $868,227,586) 868,227,586
===========================================================================
TOTAL INVESTMENTS-113.16% (Cost
$6,214,707,812) 7,561,761,264
===========================================================================
OTHER ASSETS LESS LIABILITIES-(13.16%) (879,523,251)
===========================================================================
NET ASSETS-100.00% $6,682,238,013
___________________________________________________________________________
===========================================================================
|
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at June 30, 2005.
(c) In accordance with the procedures established by the Board of Trustees, the
foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at June 30, 2005 was
$347,505,493, which represented 4.60% of the Fund's Total Investments. See
Note 1A.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.
See accompanying notes which are an integral part of the financial statements.
FS-124
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$5,222,431,546)* $6,569,484,998
------------------------------------------------------------
Investments in affiliated money market funds
(cost $992,276,266) 992,276,266
============================================================
Total investments (cost $6,214,707,812) 7,561,761,264
============================================================
Receivables for:
Investments sold 5,119,064
------------------------------------------------------------
Fund shares sold 4,167,661
------------------------------------------------------------
Dividends 7,142,621
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 157,639
------------------------------------------------------------
Other assets 170,840
============================================================
Total assets 7,578,519,089
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Fund shares reacquired 22,827,324
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 377,262
------------------------------------------------------------
Collateral upon return of securities
loaned 868,227,586
------------------------------------------------------------
Accrued distribution fees 3,130,382
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 3,542
------------------------------------------------------------
Accrued transfer agent fees 1,293,618
------------------------------------------------------------
Accrued operating expenses 421,362
============================================================
Total liabilities 896,281,076
============================================================
Net assets applicable to shares outstanding $6,682,238,013
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $5,681,467,183
------------------------------------------------------------
Undistributed net investment income (loss) (2,600,767)
------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign
currencies (343,640,879)
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 1,347,012,476
============================================================
$6,682,238,013
____________________________________________________________
============================================================
NET ASSETS:
Class A $4,117,049,326
____________________________________________________________
============================================================
Class B $1,778,417,412
____________________________________________________________
============================================================
Class C $ 605,850,187
____________________________________________________________
============================================================
Class R $ 32,427,267
____________________________________________________________
============================================================
Institutional Class $ 148,493,821
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 127,268,808
____________________________________________________________
============================================================
Class B 58,404,096
____________________________________________________________
============================================================
Class C 19,899,738
____________________________________________________________
============================================================
Class R 1,007,542
____________________________________________________________
============================================================
Institutional Class 4,503,671
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 32.35
------------------------------------------------------------
Offering price per share:
(Net asset value of $32.35 divided
by 94.50%) $ 34.23
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 30.45
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 30.45
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 32.18
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 32.97
____________________________________________________________
============================================================
|
* At June 30, 2005, securities with an aggregate market value of $851,203,515 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-125
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,489,084) $ 46,172,814
---------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $108,018 after compensation
to counterparties of $7,986,401) 1,701,461
===========================================================================
Total investment income 47,874,275
===========================================================================
EXPENSES:
Advisory fees 22,792,328
---------------------------------------------------------------------------
Administrative services fees 346,465
---------------------------------------------------------------------------
Custodian fees 317,148
---------------------------------------------------------------------------
Distribution fees:
Class A 7,440,008
---------------------------------------------------------------------------
Class B 9,262,862
---------------------------------------------------------------------------
Class C 3,148,497
---------------------------------------------------------------------------
Class R 77,002
---------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 8,099,270
---------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 41,953
---------------------------------------------------------------------------
Trustees' and officer's fees and benefits 104,535
---------------------------------------------------------------------------
Other 773,825
===========================================================================
Total expenses 52,403,893
===========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (2,165,967)
===========================================================================
Net expenses 50,237,926
===========================================================================
Net investment income (loss) (2,363,651)
===========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (includes gains from securities sold
to affiliates of $1,434,142) 185,373,081
---------------------------------------------------------------------------
Foreign currencies (438,147)
===========================================================================
184,934,934
===========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (213,662,214)
---------------------------------------------------------------------------
Foreign currencies (40,976)
===========================================================================
(213,703,190)
===========================================================================
Net gain (loss) from investment securities and foreign
currencies (28,768,256)
===========================================================================
Net increase (decrease) in net assets resulting from
operations $ (31,131,907)
___________________________________________________________________________
===========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-126
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (2,363,651) $ (24,613,460)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 184,934,934 115,956,728
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (213,703,190) 603,140,110
==============================================================================================
Net increase (decrease) in net assets resulting from
operations (31,131,907) 694,483,378
==============================================================================================
Share transactions-net:
Class A (349,399,207) 229,943,250
----------------------------------------------------------------------------------------------
Class B (194,279,746) (146,534,200)
----------------------------------------------------------------------------------------------
Class C (70,903,090) (49,796,419)
----------------------------------------------------------------------------------------------
Class R 3,268,495 14,533,591
----------------------------------------------------------------------------------------------
Institutional Class 44,594,350 96,937,383
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (566,719,198) 145,083,605
==============================================================================================
Net increase (decrease) in net assets (597,851,105) 839,566,983
==============================================================================================
NET ASSETS:
Beginning of period 7,280,089,118 6,440,522,135
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(2,600,767) and $(237,116),
respectively) $6,682,238,013 $7,280,089,118
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-127
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-128
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
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.
FS-129
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $500 million 0.725% ---------------------------------------------------------------------- Next $500 million 0.70% ---------------------------------------------------------------------- Next $500 million 0.675% ---------------------------------------------------------------------- Over $1.5 billion 0.65% ______________________________________________________________________ ====================================================================== |
Through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $250 million 0.695% ---------------------------------------------------------------------- Next $250 million 0.67% ---------------------------------------------------------------------- Next $500 million 0.645% ---------------------------------------------------------------------- Next $1.5 billion 0.62% ---------------------------------------------------------------------- Next $2.5 billion 0.595% ---------------------------------------------------------------------- Next $2.5 billion 0.57% ---------------------------------------------------------------------- Next $2.5 billion 0.545% ---------------------------------------------------------------------- Over $10 billion 0.52% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended June 30, 2005, AIM waived fees of $2,001,681.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $69,424.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $346,465.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $8,099,270 for Class A, Class B, Class C and Class R share classes and $41,953 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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 June 30, 2005, the Class A, Class B, Class C and Class R shares paid $7,440,008, $9,262,862, $3,148,497 and $77,002, 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 June 30, 2005, ADI advised the Fund that it retained $270,486 in front-end sales commissions from the sale of Class A shares and $17,617, $222,024, $30,426 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 ADI.
FS-130
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended June 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $ 49,840,942 $ 381,124,059 $ (368,940,661) $ -- $ 62,024,340 $ 792,246 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 49,840,942 381,124,059 (368,940,661) -- 62,024,340 801,197 --
===================================================================================================================================
Subtotal $ 99,681,884 $ 762,248,118 $ (737,881,322) $ -- $124,048,680 $1,593,443 $ --
===================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $312,297,068 $ 612,893,035 $ (491,076,310) $ -- $434,113,793 $ 53,608 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 312,297,069 612,893,035 (491,076,311) -- 434,113,793 54,410 --
===================================================================================================================================
Subtotal $624,594,137 $1,225,786,070 $ (982,152,621) $ -- $868,227,586 $ 108,018 $ --
===================================================================================================================================
Total $724,276,021 $1,988,034,188 $(1,720,033,943) $ -- $992,276,266 $1,701,461 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
* Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended June 30, 2005, the Fund engaged in securities purchases of $0 and sales of $4,925,700, which resulted in net realized gains of $1,434,142.
NOTE 5--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended June 30, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $94,862.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $15,335 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.
FS-131
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 June 30, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 June 30, 2005, securities with an aggregate value of $851,203,515 were on loan to brokers. The loans were secured by cash collateral of $868,227,586 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended June 30, 2005, the Fund received dividends on cash collateral of $108,018 for securities lending transactions, which are net of compensation to counterparties.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
December 31, 2010 $320,850,425
-----------------------------------------------------------------------------
December 31, 2011 197,141,083
=============================================================================
Total capital loss carryforward $517,991,508
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-132
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 June 30, 2005 was $290,741,212 and $841,529,288, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS -------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $1,584,694,933 -------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (245,845,952) ================================================================================ Net unrealized appreciation of investment securities $1,338,848,981 ________________________________________________________________________________ ================================================================================ Cost of investments for tax purposes is $6,222,912,283. |
NOTE 11--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 certain circumstances, Class A 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(a)
----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 11,274,923 $ 360,525,339 45,643,967 $ 1,367,897,119
----------------------------------------------------------------------------------------------------------------------------
Class B 2,415,002 72,755,441 11,128,015 316,220,520
----------------------------------------------------------------------------------------------------------------------------
Class C 990,540 29,849,144 4,433,952 125,791,675
----------------------------------------------------------------------------------------------------------------------------
Class R 223,273 7,130,598 668,236 19,850,960
----------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,762,701 57,290,547 3,074,246 97,385,847
============================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 1,424,242 45,462,751 3,531,163 106,295,761
----------------------------------------------------------------------------------------------------------------------------
Class B (1,510,508) (45,462,751) (3,727,321) (106,295,761)
============================================================================================================================
Reacquired:
Class A (23,629,033) (755,387,297) (41,338,578) (1,244,249,630)
----------------------------------------------------------------------------------------------------------------------------
Class B (7,355,207) (221,572,436) (12,577,796) (356,458,959)
----------------------------------------------------------------------------------------------------------------------------
Class C (3,344,370) (100,752,234) (6,194,731) (175,588,094)
----------------------------------------------------------------------------------------------------------------------------
Class R (121,672) (3,862,103) (177,088) (5,317,369)
----------------------------------------------------------------------------------------------------------------------------
Institutional Class (390,616) (12,696,197) (14,498) (448,464)
============================================================================================================================
(18,260,725) $(566,719,198) 4,449,567 $ 145,083,605
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(a)There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 9% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM, and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this entity are also owned beneficially.
FS-133
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 DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.42 $ 29.24 $ 21.86 $ 28.44 $ 28.41 $ 23.84
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03 (0.03) (0.06) (0.04)(a) (0.02)(a) 0.06
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.10) 3.21 7.44 (6.54) 0.06 4.74
=================================================================================================================================
Total from investment operations (0.07) 3.18 7.38 (6.58) 0.04 4.80
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.00) (0.00) (0.03)
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.00) (0.01) (0.20)
=================================================================================================================================
Total distributions -- -- -- (0.00) (0.01) (0.23)
=================================================================================================================================
Net asset value, end of period $ 32.35 $ 32.42 $ 29.24 $ 21.86 $ 28.44 $ 28.41
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.22)% 10.88% 33.76% (23.14)% 0.16% 20.20%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,117,049 $4,480,701 $3,812,300 $2,534,964 $2,066,536 $448,668
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.23%(c) 1.29% 1.34% 1.33% 1.30% 1.32%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.29%(c) 1.31% 1.34% 1.33% 1.30% 1.32%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.16%(c) (0.11)% (0.28)% (0.17)% (0.05)% 0.49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 4% 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$4,286,665,717.
(d) Not annualized for periods less than one year.
FS-134
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.62 $ 27.80 $ 20.91 $ 27.38 $ 27.54 $ 23.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.23) (0.21) (0.20)(a) (0.19)(a) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.09) 3.05 7.10 (6.27) 0.04 4.53
=================================================================================================================================
Total from investment operations (0.17) 2.82 6.89 (6.47) (0.15) 4.51
=================================================================================================================================
Less distributions from net realized
gains -- -- -- (0.00) (0.01) (0.20)
=================================================================================================================================
Net asset value, end of period $ 30.45 $ 30.62 $ 27.80 $ 20.91 $ 27.38 $ 27.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.56)% 10.14% 32.95% (23.63)% (0.53)% 19.47%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,778,417 $1,985,690 $1,946,590 $1,498,499 $1,538,292 $241,157
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.88%(c) 1.94% 1.99% 1.98% 1.95% 1.97%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.94%(c) 1.96% 1.99% 1.98% 1.95% 1.97%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.49)%(c) (0.76)% (0.93)% (0.82)% (0.70)% (0.16)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 4% 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$1,867,925,288.
(d) Not annualized for periods less than one year.
FS-135
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.61 $ 27.79 $ 20.91 $ 27.38 $ 27.54 $ 23.23
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.23) (0.21) (0.20)(a) (0.19)(a) (0.02)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.08) 3.05 7.09 (6.27) 0.04 4.53
=================================================================================================================================
Total from investment operations (0.16) 2.82 6.88 (6.47) (0.15) 4.51
=================================================================================================================================
Less distributions from net realized gains -- -- -- (0.00) (0.01) (0.20)
=================================================================================================================================
Net asset value, end of period $ 30.45 $ 30.61 $ 27.79 $ 20.91 $ 27.38 $ 27.54
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) (0.52)% 10.15% 32.90% (23.63)% (0.53)% 19.47%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $605,850 $681,234 $667,412 $518,575 $566,627 $193,863
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.88%(c) 1.94% 1.99% 1.98% 1.95% 1.97%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.94%(c) 1.96% 1.99% 1.98% 1.95% 1.97%
=================================================================================================================================
Ratio of net investment income (loss) to average
net assets (0.49)%(c) (0.76)% (0.93)% (0.82)% (0.70)% (0.16)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 4% 15% 20% 30% 20% 56%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$634,917,907.
(d) Not annualized for periods less than one year.
CLASS R
----------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.28 $ 29.16 $ 21.84 $27.54
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.00 (0.06) (0.06) (0.05)(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.10) 3.18 7.38 (5.65)
==================================================================================================================
Total from investment operations (0.10) 3.12 7.32 (5.70)
==================================================================================================================
Net asset value, end of period $ 32.18 $ 32.28 $ 29.16 $21.84
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) (0.31)% 10.70% 33.52% (20.70)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $32,427 $29,245 $12,097 $1,421
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.38%(c) 1.44% 1.49% 1.54%(d)
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.44%(c) 1.46% 1.49% 1.54%(d)
==================================================================================================================
Ratio of net investment income (loss) to average net assets 0.01%(c) (0.26)% (0.43)% (0.37)%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 4% 15% 20% 30%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$31,056,209.
(d) Annualized.
(e) Not annualized for periods less than one year.
FS-136
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
-----------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2005 2004 2003 2002
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 32.96 $ 29.56 $21.95 $29.63
-------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10 0.02 0.08 0.06(a)
-------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.09) 3.38 7.53 (7.74)
===================================================================================================================
Total from investment operations 0.01 3.40 7.61 (7.68)
===================================================================================================================
Net asset value, end of period $ 32.97 $ 32.96 $29.56 $21.95
___________________________________________________________________________________________________________________
===================================================================================================================
Total return(b) 0.03% 11.50% 34.67% (25.92)%
___________________________________________________________________________________________________________________
===================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $148,494 $103,219 $2,123 $1,471
___________________________________________________________________________________________________________________
===================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.71%(c) 0.71% 0.71% 0.81%(d)
-------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.77%(c) 0.73% 0.71% 0.81%(d)
===================================================================================================================
Ratio of net investment income to average net assets 0.68%(c) 0.47% 0.35% 0.35%(d)
___________________________________________________________________________________________________________________
===================================================================================================================
Portfolio turnover rate(e) 4% 15% 20% 30%
___________________________________________________________________________________________________________________
===================================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$135,193,259.
(d) Annualized.
(e) Not annualized for periods less than one year.
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits
FS-137
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-138
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
--------------------------------------------------------------
MUTUAL FUNDS-90.04%(A)
AIM Charter Fund-Institutional
Class-4.97% 227,174 $ 2,955,531
--------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-2.49% 131,396 1,480,827
--------------------------------------------------------------
AIM Large Cap Basic Value
Fund-Institutional Class-4.99%(b) 219,116 2,966,836
--------------------------------------------------------------
AIM Large Cap Growth
Fund-Institutional Class-5.01%(b) 300,893 2,975,834
--------------------------------------------------------------
AIM Limited Maturity Treasury
Fund-Institutional Class-15.01% 878,873 8,920,562
--------------------------------------------------------------
AIM Multi-Sector Fund-Institutional
Class-2.50% 64,835 1,484,080
--------------------------------------------------------------
AIM Short Term Bond
Fund-Institutional Class-25.01% 1,490,760 14,862,877
--------------------------------------------------------------
AIM Total Return Bond
Fund-Institutional Class-25.02% 1,405,077 14,865,716
--------------------------------------------------------------
|
MARKET
SHARES VALUE
--------------------------------------------------------------
AIM Trimark Endeavor
Fund-Institutional Class-5.04%(b) 235,647 $ 2,992,728
==============================================================
Total Mutual Funds (Cost
$52,737,066) 53,504,991
==============================================================
PAR
(000)
REPURCHASE AGREEMENTS-9.98%
State Street Bank & Trust 2.68%,
07/01/05 (Cost $5,931,464)(c) $ 5,931 5,931,464
==============================================================
TOTAL INVESTMENTS-100.02% (Cost
$58,668,530) 59,436,455
==============================================================
OTHER ASSETS LESS
LIABILITIES-(0.02%) (12,110)
==============================================================
NET ASSETS-100.00% $59,424,345
______________________________________________________________
==============================================================
|
Notes to Schedule of Investments:
(a) The mutual funds and the Fund are affiliated by having the same
investment advisor. See Note 3.
(b) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than
one year from the report date.
(c) Repurchase agreement entered into 06/30/05 with a maturing value of
$5,931,906. Collateralized by $6,145,000 U.S. Government obligations,
3.13% due 12/15/07 with a market value at 06/30/05 of $6,050,263.
See accompanying notes which are an integral part of the financial statements.
FS-139
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments in affiliated underlying funds,
at market value (cost $52,737,066) $53,504,991
-----------------------------------------------------------
Repurchase agreements (cost $5,931,464) 5,931,464
===========================================================
Total investments (cost $58,668,530) 59,436,455
===========================================================
Receivables for:
Investments sold 3,830
-----------------------------------------------------------
Fund shares sold 59,487
-----------------------------------------------------------
Interest 442
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 2,641
-----------------------------------------------------------
Other assets 43,465
===========================================================
Total assets 59,546,320
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 25,453
-----------------------------------------------------------
Fund shares reacquired 64,184
-----------------------------------------------------------
Trustee deferred compensation and retirement
plans 2,801
-----------------------------------------------------------
Accrued distribution fees 17,036
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 111
-----------------------------------------------------------
Accrued transfer agent fees 6,949
-----------------------------------------------------------
Accrued operating expenses 5,441
===========================================================
Total liabilities 121,975
===========================================================
Net assets applicable to shares outstanding $59,424,345
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $57,928,898
-----------------------------------------------------------
Undistributed net investment income 363,485
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 364,037
-----------------------------------------------------------
Unrealized appreciation of investment
securities 767,925
===========================================================
$59,424,345
===========================================================
NET ASSETS:
Class A $28,327,785
___________________________________________________________
===========================================================
Class B $16,708,414
___________________________________________________________
===========================================================
Class C $11,424,252
___________________________________________________________
===========================================================
Class R $ 2,858,311
___________________________________________________________
===========================================================
Institutional Class $ 105,583
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 2,718,414
___________________________________________________________
===========================================================
Class B 1,613,670
___________________________________________________________
===========================================================
Class C 1,103,798
___________________________________________________________
===========================================================
Class R 274,977
___________________________________________________________
===========================================================
Institutional Class 10,108
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.42
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.42 divided by
94.50%) $ 11.03
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.35
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.35
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.39
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.45
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-140
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 515,301
-----------------------------------------------------------------------
Interest 64,102
=======================================================================
Total investment income 579,403
=======================================================================
EXPENSES:
Administrative services fees 24,795
-----------------------------------------------------------------------
Custodian fees 4,197
-----------------------------------------------------------------------
Distribution fees:
Class A 42,098
-----------------------------------------------------------------------
Class B 67,426
-----------------------------------------------------------------------
Class C 47,623
-----------------------------------------------------------------------
Class R 7,094
-----------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 38,814
-----------------------------------------------------------------------
Trustees' and officer's fees and benefits 7,028
-----------------------------------------------------------------------
Registration and filing fees 61,415
-----------------------------------------------------------------------
Professional services fees 25,291
-----------------------------------------------------------------------
Other 20,381
=======================================================================
Total expenses 346,162
=======================================================================
Less: Expenses reimbursed and expense offset arrangement (131,763)
=======================================================================
Net expenses 214,399
=======================================================================
Net investment income 365,004
=======================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from affiliated underlying funds 310,418
=======================================================================
Change in net unrealized appreciation (depreciation) of
affiliated underlying funds (107,971)
=======================================================================
Net gain from affiliated underlying funds 202,447
=======================================================================
Net increase in net assets resulting from operations $ 567,451
_______________________________________________________________________
=======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-141
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 365,004 $ 199,269
-----------------------------------------------------------------------------------------
Net realized gain from underlying funds and capital gain
distributions of affiliated underlying funds 310,418 198,462
-----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
affiliated underlying funds (107,971) 875,896
=========================================================================================
Net increase in net assets resulting from operations 567,451 1,273,627
=========================================================================================
Distributions to shareholders from net investment income:
Class A -- (183,596)
-----------------------------------------------------------------------------------------
Class B -- (76,559)
-----------------------------------------------------------------------------------------
Class C -- (85,197)
-----------------------------------------------------------------------------------------
Class R -- (14,664)
-----------------------------------------------------------------------------------------
Institutional Class -- (1,076)
=========================================================================================
Total distributions from net investment income -- (361,092)
=========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (5,147)
-----------------------------------------------------------------------------------------
Class B -- (2,734)
-----------------------------------------------------------------------------------------
Class C -- (3,043)
-----------------------------------------------------------------------------------------
Class R -- (432)
-----------------------------------------------------------------------------------------
Institutional Class -- (27)
=========================================================================================
Total distributions from net realized gains -- (11,383)
=========================================================================================
Decrease in net assets resulting from distributions -- (372,475)
=========================================================================================
Share transactions-net:
Class A 7,903,787 19,747,738
-----------------------------------------------------------------------------------------
Class B 6,126,979 10,218,111
-----------------------------------------------------------------------------------------
Class C (409,248) 11,486,975
-----------------------------------------------------------------------------------------
Class R 1,235,930 1,544,357
-----------------------------------------------------------------------------------------
Institutional Class -- 101,113
=========================================================================================
Net increase in net assets resulting from share
transactions 14,857,448 43,098,294
=========================================================================================
Net increase in net assets 15,424,899 43,999,446
=========================================================================================
NET ASSETS:
Beginning of period 43,999,446 --
=========================================================================================
End of period (including undistributed net investment
income (loss) of $363,485 and $(1,519), respectively) $59,424,345 $43,999,446
_________________________________________________________________________________________
=========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-142
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Conservative Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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 total return consistent with a lower level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign
FS-143
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains on the ex-dividend date. Interest income is recorded on the accrual basis from settlement 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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.
F. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements. Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. Eligible securities for collateral are U.S. Government Securities, U.S. Government Agency Securities and/or Investment Grade Debt Securities. Collateral consisting of U.S. Government Securities and U.S. Government Agency Securities is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. Collateral consisting of Investment Grade Debt Securities is marked to market daily to ensure its market value is at least 105% of the sales price of the repurchase agreement. The investments in some repurchase agreements, pursuant to procedures approved by the Board of Trustees, are through participation with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates ("Joint repurchase agreements"). If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the 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.
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES
The Trust has entered into a master investment advisory agreement with AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds.
AIM has contractually agreed to reimburse expenses to the extent necessary
to limit other expenses (excluding certain items discussed below) of Class A,
Class B, Class C, Class R and Institutional Class shares to 0.20% of average
daily net assets, respectively, through December 31, 2005. In determining the
advisor's obligation to reimburse expenses, the following expenses are not taken
into account, and could cause other expenses to exceed the limit stated above:
(i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend
expense on short sales; (v) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (vi) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses
of the underlying funds that are paid indirectly as a result of share ownership
of the underlying funds; and (viii) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year.
For the six months ended June 30, 2005, AIM reimbursed expenses of $130,023.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $1,070.
FS-144
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $24,795.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $38,814 for Class A, Class B, Class C and Class R share classes and $0 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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 June 30, 2005, the Class A, Class B, Class C and Class R shares paid $42,098, $67,426, $47,623 and $7,094, 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 June 30, 2005, ADI advised the Fund that it retained $48,437 in front-end sales commissions from the sale of Class A shares and $2, $10,776, $1,707 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to ADI for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the six months ended June 30, 2005.
CHANGE IN
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
AIM Charter
Fund-
Institutional
Class $ 2,288,956 $ 1,284,689 $ (598,934) $ (50,327) $ 2,955,531 $ -- $ 31,147
----------------------------------------------------------------------------------------------------------------------------------
AIM
International
Core Equity
Fund-
Institutional
Class 1,211,075 642,345 (344,722) (69,140) 1,480,827 -- 41,269
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Basic Value
Fund-
Institutional
Class 2,333,821 1,284,688 (665,305) (42,782) 2,966,836 -- 56,414
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Growth Fund-
Institutional
Class 2,321,950 1,284,688 (631,274) (41,067) 2,975,834 -- 41,537
----------------------------------------------------------------------------------------------------------------------------------
AIM Limited
Maturity
Fund-
Institutional
Class 6,415,786 4,141,282 (1,606,590) (16,719) 8,920,562 93,060 (13,197)
----------------------------------------------------------------------------------------------------------------------------------
AIM
Multi-Sector
Fund-
Institutional
Class 1,191,575 642,344 (427,944) 24,056 1,484,080 -- 54,049
----------------------------------------------------------------------------------------------------------------------------------
AIM Short Term
Bond Fund-
Institutional
Class 10,744,498 6,825,857 (2,693,459) (4,283) 14,862,877 203,628 (9,736)
----------------------------------------------------------------------------------------------------------------------------------
AIM Total
Return Bond
Fund-
Institutional
Class 10,845,845 6,642,058 (2,779,640) 133,642 14,865,716 218,613 23,811
----------------------------------------------------------------------------------------------------------------------------------
AIM Trimark
Endeavor
Fund-
Institutional
Class 2,379,953 1,284,688 (715,686) (41,351) 2,992,728 -- 85,124
==================================================================================================================================
Total $39,733,459 $24,032,639 $(10,463,554) $(107,971) $53,504,991 $515,301 $310,418
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
FS-145
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended June 30, 2005, the Fund received credits from this arrangement, which resulted in a reduction of the Fund's total expenses of $670.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $2,040 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
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 June 30, 2005, the Fund did not 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 SSB, 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 at 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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2004.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the six months ended June 30, 2005 was $24,032,639 and $10,463,554, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $859,528 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (92,264) ============================================================================== Net unrealized appreciation of investment securities $767,264 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $58,669,191. |
FS-146
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 certain 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
------------------------------------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
SIX MONTHS ENDED COMMENCED) TO
JUNE 30, 2005 DECEMBER 31, 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 1,525,519 $15,720,789 2,129,826 $21,567,020
------------------------------------------------------------------------------------------------------------------
Class B 813,224 8,331,611 1,120,422 11,295,205
------------------------------------------------------------------------------------------------------------------
Class C 523,380 5,362,420 1,195,865 12,024,756
------------------------------------------------------------------------------------------------------------------
Class R 292,612 2,998,971 166,330 1,674,671
------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 10,001 100,010
==================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 17,350 178,529
------------------------------------------------------------------------------------------------------------------
Class B -- -- 6,647 68,130
------------------------------------------------------------------------------------------------------------------
Class C -- -- 8,491 87,033
------------------------------------------------------------------------------------------------------------------
Class R -- -- 1,468 15,096
------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 107 1,103
==================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 25,952 268,546 32,087 329,905
------------------------------------------------------------------------------------------------------------------
Class B (26,099) (268,546) (32,212) (329,905)
==================================================================================================================
Reacquired:
Class A (783,742) (8,085,548) (228,578) (2,327,716)
------------------------------------------------------------------------------------------------------------------
Class B (188,376) (1,936,086) (79,936) (815,319)
------------------------------------------------------------------------------------------------------------------
Class C (562,728) (5,771,668) (61,210) (624,814)
------------------------------------------------------------------------------------------------------------------
Class R (171,327) (1,763,041) (14,106) (145,410)
==================================================================================================================
1,448,415 $14,857,448 4,272,552 $43,098,294
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-147
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.32 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.06
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.02 0.36
===============================================================================================
Total from investment operations 0.10 0.42
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.10)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.10)
===============================================================================================
Net asset value, end of period $ 10.42 $ 10.32
_______________________________________________________________________________________________
===============================================================================================
Total return(a) 0.97% 4.19%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,328 $20,124
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.55%(b) 0.55%(c)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.08%(b) 1.41%(c)
===============================================================================================
Estimated underlying fund expenses(d) 0.63% 0.63%
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income to average net assets 1.77%(b) 1.74%(c)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 23% 9%
_______________________________________________________________________________________________
===============================================================================================
|
(a) 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 purpose 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.
(b) Ratios are annualized and based on average daily net assets of
$24,255,323.
(c) Annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods of less than one year.
FS-148
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.28 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.04
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.02 0.32
===============================================================================================
Total from investment operations 0.07 0.36
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.08)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.08)
===============================================================================================
Net asset value, end of period $ 10.35 $ 10.28
_______________________________________________________________________________________________
===============================================================================================
Total return(a) 0.68% 3.59%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $16,708 $10,436
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 1.20%(b) 1.20%(c)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.73%(b) 2.06%(c)
===============================================================================================
Estimated underlying fund expenses(d) 0.63% 0.63%
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income to average net assets 1.12%(b) 1.09%(c)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 23% 9%
_______________________________________________________________________________________________
===============================================================================================
|
(a) 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 purpose 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.
(b) Ratios are annualized and based on average daily net assets of
$13,596,980.
(c) Annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods of less than one year.
FS-149
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.28 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.05 0.04
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.02 0.32
===============================================================================================
Total from investment operations 0.07 0.36
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.08)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.08)
===============================================================================================
Net asset value, end of period $ 10.35 $ 10.28
_______________________________________________________________________________________________
===============================================================================================
Total return(a) 0.68% 3.59%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,424 $11,751
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 1.20%(b) 1.20%(c)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.73%(b) 2.06%(c)
===============================================================================================
Estimated underlying fund expenses(d) 0.63% 0.63%
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income to average net assets 1.12%(b) 1.09%(c)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 23% 9%
_______________________________________________________________________________________________
===============================================================================================
|
(a) 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 purpose 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.
(b) Ratios are annualized and based on average daily net assets of
$9,603,566.
(c) Annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods of less than one year.
FS-150
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.31 $10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.06
-----------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.00) 0.34
===============================================================================================
Total from investment operations 0.08 0.40
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.09)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.09)
===============================================================================================
Net asset value, end of period $10.39 $10.31
_______________________________________________________________________________________________
===============================================================================================
Total return(a) 0.78% 4.05%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,858 $1,584
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.70%(b) 0.70%(c)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.23%(b) 1.56%(c)
===============================================================================================
Estimated underlying fund expenses(d) 0.63% 0.63%
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income to average net assets 1.62%(b) 1.59%(c)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 23% 9%
_______________________________________________________________________________________________
===============================================================================================
|
(a) 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 purpose and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of
$2,860,850.
(c) Annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods of less than one year.
FS-151
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.32 $10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.11 0.14
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.02 0.29
===============================================================================================
Total from investment operations 0.13 0.43
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.11)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.11)
===============================================================================================
Net asset value, end of period $10.45 $10.32
_______________________________________________________________________________________________
===============================================================================================
Total return(a) 1.26% 4.31%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 106 $ 104
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.20%(b) 0.20%(c)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 0.57%(b) 0.96%(c)
===============================================================================================
Estimated underlying fund expenses(d) 0.63% 0.63%
_______________________________________________________________________________________________
===============================================================================================
Ratio of net investment income to average net assets 2.12%(b) 2.09%(c)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(e) 23% 9%
_______________________________________________________________________________________________
===============================================================================================
|
(a) 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 purpose and the returns based upon those
net asset values may differ from the net asset value and returns for
shareholder transactions. Not annualized for periods less than one year.
(b) Ratios are annualized and based on average daily net assets of $104,319.
(c) Annualized.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods of less than one year.
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-152
NOTE 11--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code ss. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-153
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
DOMESTIC COMMON STOCKS-52.29%
APPAREL RETAIL-1.58%
Abercrombie & Fitch Co.-Class A 28,200 $ 1,937,340
------------------------------------------------------------------------
Genesco Inc.(a) 53,700 1,991,733
------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 58,500 2,014,155
========================================================================
5,943,228
========================================================================
APPLICATION SOFTWARE-0.64%
Synopsys, Inc.(a) 144,600 2,410,482
========================================================================
AUTO PARTS & EQUIPMENT-0.41%
Tenneco Automotive Inc.(a) 92,200 1,534,208
========================================================================
AUTOMOTIVE RETAIL-0.34%
CSK Auto Corp.(a) 75,400 1,257,672
========================================================================
COMPUTER HARDWARE-3.37%
Apple Computer, Inc.(a) 98,600 3,629,466
------------------------------------------------------------------------
Dell Inc.(a)(b) 228,200 9,016,182
========================================================================
12,645,648
========================================================================
COMPUTER STORAGE & PERIPHERALS-0.57%
EMC Corp.(a) 80,500 1,103,655
------------------------------------------------------------------------
Western Digital Corp.(a) 78,400 1,052,128
========================================================================
2,155,783
========================================================================
DEPARTMENT STORES-0.38%
J.C. Penney Co., Inc. 27,200 1,430,176
========================================================================
DIVERSIFIED BANKS-1.29%
Wachovia Corp. 97,300 4,826,080
========================================================================
ELECTRIC UTILITIES-1.11%
Edison International 54,800 2,222,140
------------------------------------------------------------------------
PG&E Corp. 52,100 1,955,834
========================================================================
4,177,974
========================================================================
FOOTWEAR-0.39%
K-Swiss Inc.-Class A 44,800 1,448,832
========================================================================
GAS UTILITIES-1.34%
Northwest Natural Gas Co. 70,900 2,711,216
------------------------------------------------------------------------
Questar Corp. 35,200 2,319,680
========================================================================
5,030,896
========================================================================
HEALTH CARE EQUIPMENT-0.94%
Hospira, Inc.(a) 90,900 3,545,100
========================================================================
HEALTH CARE FACILITIES-0.31%
HCA Inc. 20,500 1,161,735
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
HOMEBUILDING-0.29%
Hovnanian Enterprises, Inc.-Class A(a) 16,500 $ 1,075,800
========================================================================
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS-0.24%
TXU Corp. 11,000 913,990
========================================================================
INDUSTRIAL CONGLOMERATES-2.33%
3M Co.(b) 120,700 8,726,610
========================================================================
INTEGRATED OIL & GAS-1.84%
Exxon Mobil Corp. 60,200 3,459,694
------------------------------------------------------------------------
Occidental Petroleum Corp. 44,800 3,446,464
========================================================================
6,906,158
========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.28%
CenturyTel, Inc. 30,500 1,056,215
========================================================================
INTERNET RETAIL-0.62%
Netflix Inc.(a)(b) 142,900 2,344,989
========================================================================
INVESTMENT BANKING & BROKERAGE-0.42%
Goldman Sachs Group, Inc. (The) 15,500 1,581,310
========================================================================
LEISURE PRODUCTS-0.36%
JAKKS Pacific, Inc.(a) 69,800 1,340,858
========================================================================
LIFE & HEALTH INSURANCE-2.55%
Prudential Financial, Inc. 145,500 9,553,530
========================================================================
MANAGED HEALTH CARE-3.88%
Aetna Inc. 11,300 935,866
------------------------------------------------------------------------
CIGNA Corp. 40,700 4,356,121
------------------------------------------------------------------------
UnitedHealth Group Inc. 177,600 9,260,064
========================================================================
14,552,051
========================================================================
OIL & GAS EXPLORATION & PRODUCTION-4.03%
Apache Corp. 40,100 2,590,460
------------------------------------------------------------------------
Burlington Resources Inc. 17,800 983,272
------------------------------------------------------------------------
Houston Exploration Co. (The)(a) 102,500 5,437,625
------------------------------------------------------------------------
Remington Oil & Gas Corp.(a) 170,600 6,090,420
========================================================================
15,101,777
========================================================================
OIL & GAS STORAGE & TRANSPORTATION-0.36%
Overseas Shipholding Group, Inc. 22,800 1,360,020
========================================================================
PAPER PRODUCTS-1.22%
Georgia-Pacific Corp. 143,500 4,563,300
========================================================================
|
FS-154
MARKET
SHARES VALUE
------------------------------------------------------------------------
PHARMACEUTICALS-3.34%
Johnson & Johnson(b) 138,500 $ 9,002,500
------------------------------------------------------------------------
Wyeth 79,600 3,542,200
========================================================================
12,544,700
========================================================================
RAILROADS-2.00%
Burlington Northern Santa Fe Corp. 159,600 7,513,968
========================================================================
RESTAURANTS-0.27%
Texas Roadhouse, Inc.-Class A(a) 28,800 1,000,800
========================================================================
SEMICONDUCTORS-4.60%
Intel Corp.(b) 343,100 8,941,186
------------------------------------------------------------------------
Linear Technology Corp.(b) 204,400 7,499,436
------------------------------------------------------------------------
Maxim Integrated Products, Inc. 20,900 798,589
========================================================================
17,239,211
========================================================================
SPECIALIZED FINANCE-3.22%
CIT Group Inc. 61,900 2,659,843
------------------------------------------------------------------------
Moody's Corp.(b) 209,900 9,437,104
========================================================================
12,096,947
========================================================================
SPECIALTY STORES-0.35%
Movie Gallery, Inc. 49,200 1,300,356
========================================================================
SYSTEMS SOFTWARE-1.08%
Adobe Systems Inc.(b) 141,600 4,052,592
========================================================================
THRIFTS & MORTGAGE FINANCE-1.20%
Countrywide Financial Corp. 32,100 1,239,381
------------------------------------------------------------------------
Fremont General Corp. 93,200 2,267,556
------------------------------------------------------------------------
Harbor Florida Bancshares, Inc. 26,500 992,160
========================================================================
4,499,097
========================================================================
TOBACCO-3.48%
Reynolds American Inc. 109,200 8,604,960
------------------------------------------------------------------------
UST Inc. 97,300 4,442,718
========================================================================
13,047,678
========================================================================
TRUCKING-1.66%
CNF Inc. 53,200 2,388,680
------------------------------------------------------------------------
Laidlaw International Inc.(a) 159,500 3,843,950
========================================================================
6,232,630
========================================================================
Total Domestic Common Stocks (Cost
$179,189,486) 196,172,401
========================================================================
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-42.81%
AUSTRALIA-0.66%
Australia & New Zealand Banking Group Ltd.
(Diversified Banks)(c) 60,200 994,599
------------------------------------------------------------------------
Suncorp-Metway Ltd. (Other Diversified
Financial Services)(c) 96,686 1,477,334
========================================================================
2,471,933
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
BRAZIL-0.28%
Banco Itau Holding Financeira S.A.-ADR
(Diversified Banks)(b) 11,400 $ 1,054,500
========================================================================
CANADA-0.20%
Inmet Mining Corp. (Diversified Metals &
Mining)(a) 57,900 749,002
========================================================================
CAYMAN ISLANDS-1.94%
ACE Ltd. (Property & Casualty Insurance) 53,000 2,377,050
------------------------------------------------------------------------
Seagate Technology (Computer Storage &
Peripherals)(a) 279,500 4,905,225
========================================================================
7,282,275
========================================================================
DENMARK-1.72%
Danske Bank A.S. (Diversified Banks)(c) 104,900 3,150,921
------------------------------------------------------------------------
William Demant Holdings A.S. (Health Care
Equipment)(b)(c) 66,547 3,307,703
========================================================================
6,458,624
========================================================================
FINLAND-0.49%
Nokia Oyj (Communications Equipment)(c) 110,600 1,840,354
========================================================================
FRANCE-5.00%
Assurances Generales de France (Multi-Line
Insurance)(b)(c) 36,368 2,971,717
------------------------------------------------------------------------
AXA (Multi-Line Insurance)(c) 89,751 2,234,643
------------------------------------------------------------------------
PagesJaunes S.A. (Publishing)(c) 313,714 7,328,036
------------------------------------------------------------------------
Societe Generale (Diversified Banks)(c) 61,290 6,215,259
========================================================================
18,749,655
========================================================================
GERMANY-2.56%
Adidas-Salomon A.G. (Apparel, Accessories &
Luxury Goods)(c) 18,595 3,101,887
------------------------------------------------------------------------
BASF A.G. (Diversified Chemicals)(c) 46,696 3,090,822
------------------------------------------------------------------------
ThyssenKrupp A.G. (Steel)(c) 196,698 3,400,724
========================================================================
9,593,433
========================================================================
GREECE-2.80%
OPAP S.A. (Casinos & Gaming)(c) 364,102 10,519,600
========================================================================
ITALY-0.45%
Milano Assicurazioni S.p.A (Multi-Line
Insurance)(c) 270,700 1,683,712
========================================================================
JAPAN-8.88%
Chubu Electric Power Co., Inc. (Electric
Utilities)(b)(c) 294,100 7,047,805
------------------------------------------------------------------------
Chugoku Electric Power Co., Inc. (The)
(Electric Utilities)(c) 46,400 904,652
------------------------------------------------------------------------
Fuji Fire and Marine Insurance Co., Ltd.
(The) (Property & Casualty Insurance)(c) 351,000 1,106,943
------------------------------------------------------------------------
Hokuriku Electric Power Co. (Electric
Utilities)(b)(c) 181,700 3,462,866
------------------------------------------------------------------------
Kyushu Electric Power Co., Inc. (Electric
Utilities)(c) 406,000 8,815,593
------------------------------------------------------------------------
|
FS-155
MARKET
SHARES VALUE
------------------------------------------------------------------------
JAPAN-(CONTINUED)
Matsui Securities Co., Ltd. (Investment
Banking & Brokerage)(b)(c) 121,800 $ 1,299,036
------------------------------------------------------------------------
Mizuho Financial Group, Inc. (Diversified
Banks)(c) 192 863,061
------------------------------------------------------------------------
Nikko Cordial Corp. (Investment Banking &
Brokerage)(c) 209,000 913,182
------------------------------------------------------------------------
Nissin Co., Ltd. (Consumer Finance)(b)(c) 471,679 881,048
------------------------------------------------------------------------
NTT DoCoMo, Inc. (Wireless Telecommunication
Services)(c) 2,496 3,677,480
------------------------------------------------------------------------
Tokai Tokyo Securities Co., Ltd. (Investment
Banking & Brokerage)(b)(c) 340,000 1,016,553
------------------------------------------------------------------------
Yamato Kogyo Co., Ltd. (Steel)(b)(c) 279,000 3,309,878
========================================================================
33,298,097
========================================================================
NETHERLANDS-2.87%
DSM N.V. (Specialty Chemicals)(c) 12,743 871,172
------------------------------------------------------------------------
ING Groep N.V.-Dutch Ctfs. (Other Diversified
Financial Services)(c) 310,788 8,735,747
------------------------------------------------------------------------
Koninklijke (Royal) KPN N.V. (Integrated
Telecommunication Services)(c) 140,062 1,171,446
========================================================================
10,778,365
========================================================================
NORWAY-2.10%
Norsk Hydro A.S.A. (Oil & Gas Exploration &
Production)(b)(c) 39,342 3,576,384
------------------------------------------------------------------------
Orkla A.S.A. (Packaged Foods & Meats)(c) 22,550 829,894
------------------------------------------------------------------------
Storebrand A.S.A. (Multi-Line Insurance)(c) 372,600 3,476,362
========================================================================
7,882,640
========================================================================
SOUTH KOREA-0.42%
POSCO (Steel)(c) 8,990 1,565,650
========================================================================
SPAIN-0.64%
Telefonica Publicidad e Informacion, S.A.
(Publishing)(c) 274,224 2,389,977
========================================================================
SWEDEN-0.90%
ForeningsSparbanken A.B. (Diversified
Banks)(c) 103,100 2,260,789
------------------------------------------------------------------------
Hennes & Mauritz A.B.-Class B (Apparel
Retail)(c) 31,700 1,112,186
========================================================================
3,372,975
========================================================================
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
TAIWAN-1.61%
China Steel Corp. (Steel)(c) 5,998,310 $ 6,048,217
========================================================================
UNITED KINGDOM-9.29%
Aviva PLC (Multi-Line Insurance)(c) 187,527 2,082,269
------------------------------------------------------------------------
GlaxoSmithKline PLC (Pharmaceuticals)(c) 191,370 4,624,175
------------------------------------------------------------------------
Legal & General Group PLC (Life & Health
Insurance)(c) 2,607,517 5,352,700
------------------------------------------------------------------------
Lloyds TSB Group PLC (Diversified Banks)(c) 870,938 7,355,093
------------------------------------------------------------------------
Old Mutual PLC (Life & Health Insurance)(c) 2,105,995 4,590,214
------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products)(c) 58,580 1,720,790
------------------------------------------------------------------------
Tesco PLC (Food Retail)(c) 1,600,339 9,117,184
========================================================================
34,842,425
========================================================================
Total Foreign Stocks & Other Equity
Interests (Cost $154,844,983) 160,581,434
========================================================================
MONEY MARKET FUNDS-4.09%
Liquid Assets Portfolio-Institutional
Class(d) 7,667,722 7,667,722
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d) 7,667,722 7,667,722
========================================================================
Total Money Market Funds (Cost
$15,335,444) 15,335,444
========================================================================
TOTAL INVESTMENTS-99.19% (excluding
investments purchased with cash collateral
from securities loaned) (Cost $349,369,913) 372,089,279
________________________________________________________________________
========================================================================
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-11.96%
Liquid Assets Portfolio-Institutional
Class(d)(e) 22,440,326 22,440,326
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(d)(e) 22,440,327 22,440,327
========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $44,880,653) 44,880,653
========================================================================
TOTAL INVESTMENTS-111.15% (Cost $394,250,566) 416,969,932
========================================================================
OTHER ASSETS LESS LIABILITIES-(11.15%) (41,829,586)
========================================================================
NET ASSETS-100.00% $375,140,346
________________________________________________________________________
========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt Ctfs - Certificates |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at June 30, 2005.
(c) In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market
prices. The aggregate market value of these securities at June 30, 2005
was $151,495,657, which represented 36.33% of the Fund's Total
Investments. See Note 1A.
(d) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(e) The security has been segregated to satisfy the forward commitment to
return the cash collateral received in securities lending transactions
upon the borrower's return of the securities loaned. See Note 7.
See accompanying notes which are an integral part of the financial statements.
FS-156
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$334,034,469)* $356,753,835
-----------------------------------------------------------
Investments in affiliated money market funds
(cost $60,216,097) 60,216,097
===========================================================
Total investments (cost $394,250,566) 416,969,932
-----------------------------------------------------------
Foreign currencies, at market value (cost
$2,573,679) 2,543,344
-----------------------------------------------------------
Receivables for:
Fund shares sold 1,125,371
-----------------------------------------------------------
Dividends 426,024
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 13,656
-----------------------------------------------------------
Other assets 54,533
===========================================================
Total assets 421,132,860
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Fund shares reacquired 783,404
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 20,576
-----------------------------------------------------------
Collateral upon return of securities loaned 44,880,653
-----------------------------------------------------------
Accrued distribution fees 193,987
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 137
-----------------------------------------------------------
Accrued transfer agent fees 42,590
-----------------------------------------------------------
Accrued operating expenses 71,167
===========================================================
Total liabilities 45,992,514
===========================================================
Net assets applicable to shares outstanding $375,140,346
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $313,987,518
-----------------------------------------------------------
Undistributed net investment income 2,233,179
-----------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies
and futures contracts 36,240,212
-----------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 22,679,437
===========================================================
$375,140,346
___________________________________________________________
===========================================================
NET ASSETS:
Class A $227,171,376
___________________________________________________________
===========================================================
Class B $ 87,536,730
___________________________________________________________
===========================================================
Class C $ 30,097,616
___________________________________________________________
===========================================================
Institutional Class $ 30,334,624
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 14,341,652
___________________________________________________________
===========================================================
Class B 5,746,823
___________________________________________________________
===========================================================
Class C 1,978,521
___________________________________________________________
===========================================================
Institutional Class 1,900,216
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 15.84
-----------------------------------------------------------
Offering price per share:
(Net asset value of $15.84 divided by
95.25%) $ 16.63
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 15.23
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 15.21
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 15.96
___________________________________________________________
===========================================================
|
* At June 30, 2005, securities with an aggregate market value of $43,051,392 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-157
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $383,736) $ 4,802,218
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $29,688, after compensation
to counterparties of $444,198) 259,367
--------------------------------------------------------------------------
Interest 2,966
==========================================================================
Total investment income 5,064,551
==========================================================================
EXPENSES:
Advisory fees 1,609,086
--------------------------------------------------------------------------
Administrative services fees 52,835
--------------------------------------------------------------------------
Custodian fees 73,467
--------------------------------------------------------------------------
Distribution fees:
Class A 355,379
--------------------------------------------------------------------------
Class B 399,936
--------------------------------------------------------------------------
Class C 126,692
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B and C 337,616
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 2,843
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 10,674
--------------------------------------------------------------------------
Other 152,278
==========================================================================
Total expenses 3,120,806
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (306,234)
--------------------------------------------------------------------------
Net expenses 2,814,572
==========================================================================
Net investment income 2,249,979
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 30,821,413
--------------------------------------------------------------------------
Foreign currencies 136,253
--------------------------------------------------------------------------
Futures contracts (12,751)
==========================================================================
30,944,915
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (29,466,862)
--------------------------------------------------------------------------
Foreign currencies (46,550)
==========================================================================
(29,513,412)
==========================================================================
Net gain from investment securities, foreign currencies and
futures contracts 1,431,503
==========================================================================
Net increase in net assets resulting from operations $ 3,681,482
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-158
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ 2,249,979 $ (599,591)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and futures contracts 30,944,915 16,401,355
------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (29,513,412) 29,616,874
==========================================================================================
Net increase in net assets resulting from operations 3,681,482 45,418,638
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (8,703,573)
------------------------------------------------------------------------------------------
Class B -- (3,757,370)
------------------------------------------------------------------------------------------
Class C -- (988,497)
------------------------------------------------------------------------------------------
Institutional Class -- (647,260)
==========================================================================================
Decrease in net assets resulting from distributions -- (14,096,700)
------------------------------------------------------------------------------------------
Share transactions-net:
Class A 42,250,361 53,265,793
------------------------------------------------------------------------------------------
Class B 12,673,643 2,659,676
------------------------------------------------------------------------------------------
Class C 9,467,869 8,517,732
------------------------------------------------------------------------------------------
Institutional Class 16,998,350 12,681,245
==========================================================================================
Net increase in net assets resulting from share
transactions 81,390,223 77,124,446
==========================================================================================
Net increase in net assets 85,071,705 108,446,384
==========================================================================================
NET ASSETS:
Beginning of period 290,068,641 181,622,257
==========================================================================================
End of period (including undistributed net investment
income (loss) of $2,233,179 and $(16,800), respectively) $375,140,346 $290,068,641
__________________________________________________________________________________________
==========================================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Global Equity Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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.
FS-159
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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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.
FS-160
E. 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 and other shareholder recordkeeping 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.
F. REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on all 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.
G. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
H. 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.
I. 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 received or made 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.
J. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to substitute such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $500 million 0.975% ---------------------------------------------------------------------- Next $500 million 0.95% ---------------------------------------------------------------------- Next $500 million 0.925% ---------------------------------------------------------------------- Over $1.5 billion 0.90% ______________________________________________________________________ ====================================================================== |
FS-161
Through December 31, 2009, AIM has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by the Fund based on the Fund's average daily net assets do not exceed the annual rate of:
AVERAGE NET ASSETS RATE --------------------------------------------------------------------- First $250 million 0.80% --------------------------------------------------------------------- Next $250 million 0.78% --------------------------------------------------------------------- Next $500 million 0.76% --------------------------------------------------------------------- Next $1.5 billion 0.74% --------------------------------------------------------------------- Next $2.5 billion 0.72% --------------------------------------------------------------------- Next $2.5 billion 0.70% --------------------------------------------------------------------- Next $2.5 billion 0.68% --------------------------------------------------------------------- Over $10 billion 0.66% _____________________________________________________________________ ===================================================================== |
AIM has contractually agreed to waive advisory fees and/or reimburse
expenses to the extent necessary to limit total annual operating expenses
(excluding certain items discussed below) of Class A, Class B, Class C and
Institutional Class shares to 1.75%, 2.50%, 2.50% and 1.50% of average daily net
assets, respectively, through December 31, 2005. 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 limits stated above: (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), or items designated as such 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, in addition to the
expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP") described more
fully below, the only expense offset arrangements from which the Fund may
benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year. AIM did not waive fees
and/or reimburse expenses during the period under this expense limitation.
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended June 30, 2005, AIM waived fees of $299,230.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement, are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $1,442.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $52,835.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $337,616 for Class A, Class B and Class C share classes and $2,843 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") to serve as the distributor for the Class A, Class B, Class C 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 and Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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 June 30, 2005, the Class A, Class B and Class C shares paid $355,379, $399,936 and $126,692, 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
FS-162
deducted from redemption proceeds prior to remittance to the shareholder. During the six months ended June 30, 2005, ADI advised the Fund that it retained $58,712 in front-end sales commissions from the sale of Class A shares and $4, $11,590 and $1,149 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended June 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME
------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $ 7,135,683 $48,242,723 $(47,710,684) $ -- $ 7,667,722 $114,221
------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 7,135,683 48,242,723 (47,710,684) -- 7,667,722 115,458
========================================================================================================================
Subtotal $14,271,366 $96,485,446 $(95,421,368) $ -- $15,335,444 $229,679
________________________________________________________________________________________________________________________
========================================================================================================================
REALIZED
FUND GAIN (LOSS)
-----------------------------
Liquid Assets
Portfolio-Institutional
Class $ --
-----------------------------
STIC Prime
Portfolio-Institutional
Class --
=============================
Subtotal $ --
_____________________________
=============================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME*
------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-Institutional
Class $12,166,970 $ 75,975,728 $ (65,702,372) $ -- $22,440,326 $ 14,728
------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-Institutional
Class 12,166,971 75,975,728 (65,702,372) -- 22,440,327 14,960
========================================================================================================================
Subtotal $24,333,941 $151,951,456 $(131,404,744) $ -- $44,880,653 $ 29,688
========================================================================================================================
Total $38,605,307 $248,436,902 $(226,826,112) $ -- $60,216,097 $259,367
________________________________________________________________________________________________________________________
========================================================================================================================
REALIZED
FUND GAIN (LOSS)
---------------------------
Liquid Assets
Portfolio-Institutional
Class $ --
---------------------------
STIC Prime
Portfolio-Institutional
Class --
===========================
Subtotal $ --
===========================
Total $ --
___________________________
===========================
|
* Net of compensation to counterparties.
NOTE 4--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended June 30, 2005, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $5,562.
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $2,526 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.
FS-163
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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 June 30, 2005, 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 SSB, 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 at 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 June 30, 2005, securities with an aggregate value of $43,051,392 were on loan to brokers. The loans were secured by cash collateral of $44,880,653 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended June 30, 2005, the Fund received dividends on cash collateral of $29,688 for securities lending transactions, which are net of compensation to counterparties.
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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2004.
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 June 30, 2005 was $315,657,362 and $235,416,062, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $31,062,408 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,350,758) =============================================================================== Net unrealized appreciation of investment securities $22,711,650 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $394,258,282. |
FS-164
NOTE 10--SHARE INFORMATION
The Fund currently offers four different classes of shares: Class A shares, Class B shares, Class C 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. Institutional Class shares are sold at net asset value. Under certain 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(a)
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 3,571,871 $ 56,168,864 3,988,346 $ 58,566,755
----------------------------------------------------------------------------------------------------------------------
Class B 1,714,931 25,954,397 1,895,283 26,890,560
----------------------------------------------------------------------------------------------------------------------
Class C 744,135 11,242,236 790,970 11,285,487
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) 1,090,421 17,421,491 842,987 12,784,860
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 529,315 8,130,282
----------------------------------------------------------------------------------------------------------------------
Class B -- -- 236,432 3,503,919
----------------------------------------------------------------------------------------------------------------------
Class C -- -- 64,371 952,680
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) -- -- 37 576
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 417,358 6,563,406 1,088,278 15,900,255
----------------------------------------------------------------------------------------------------------------------
Class B (433,247) (6,563,406) (1,123,493) (15,900,255)
======================================================================================================================
Reacquired:(c)
Class A (1,302,351) (20,481,909) (2,017,034) (29,331,499)
----------------------------------------------------------------------------------------------------------------------
Class B (443,717) (6,717,348) (846,484) (11,834,548)
----------------------------------------------------------------------------------------------------------------------
Class C (116,796) (1,774,367) (264,781) (3,720,435)
----------------------------------------------------------------------------------------------------------------------
Institutional Class(b) (26,572) (423,141) (6,657) (104,191)
======================================================================================================================
5,216,033 $ 81,390,223 5,177,570 $ 77,124,446
______________________________________________________________________________________________________________________
======================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of
the outstanding shares of the Fund and in the aggregate they own 12% of
the outstanding shares of the Fund. AIM Distributors has an agreement
with these entities to sell Fund shares. The Fund, AIM and/or AIM
affiliates may make payments to these entities, which are considered to
be related to the Fund, for providing services to the Fund, AIM and/or
AIM affiliates including but not limited to services such as, securities
brokerage, distribution, third party record keeping and account
servicing. The Trust has no knowledge as to whether all or any portion
of the shares owned of record by these shareholders are also owned
beneficially.
(b) Institutional Class shares commenced sales on April 30, 2004.
(c) Amount is net of redemption fees of $5,064, $200 and $5 for Class A,
Class B and Class C shares, respectively, for the six months ended June
30, 2005 and $4,833, $2,171, $476 and $107 for Class A, Class B, Class C
and Institutional shares, respectively, for the year ended December 31,
2004.
FS-165
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 DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.65 $ 13.54 $ 9.95 $ 11.00 $ 13.33 $ 15.78
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.12(a) (0.02)(a) (0.06)(a) (0.02)(a) (0.10)(a) (0.19)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.07 2.93 3.79 (1.03) (2.17) (1.11)
=================================================================================================================================
Total from investment operations 0.19 2.91 3.73 (1.05) (2.27) (1.30)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.06) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.80) (0.14) -- -- (1.15)
=================================================================================================================================
Total distributions -- (0.80) (0.14) -- (0.06) (1.15)
=================================================================================================================================
Redemptions fees added to shares of
beneficial interest 0.00 0.00 0.00 -- -- --
=================================================================================================================================
Net asset value, end of period $ 15.84 $ 15.65 $ 13.54 $ 9.95 $ 11.00 $ 13.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.21% 21.64% 37.51% (9.55)% (17.03)% (7.90)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $227,171 $182,416 $109,205 $68,335 $80,630 $20,751
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.54%(c) 1.94% 2.00% 2.00% 2.00% 2.00%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.72%(c) 1.96% 2.05% 2.05% 2.25% 2.14%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 1.53%(c) (0.11)% (0.50)% (0.18)% (0.94)% (1.27)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 76% 115% 178% 80% 154% 260%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$204,756,476.
(d) Not annualized for periods less than one year.
FS-166
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.10 $ 13.15 $ 9.71 $ 10.80 $ 13.12 $ 15.62
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07(a) (0.09)(a) (0.11)(a) (0.07)(a) (0.15)(a) (0.26)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.06 2.84 3.69 (1.02) (2.13) (1.09)
=================================================================================================================================
Total from investment operations 0.13 2.75 3.58 (1.09) (2.28) (1.35)
=================================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.04) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.80) (0.14) -- -- (1.15)
=================================================================================================================================
Total distributions -- (0.80) (0.14) -- (0.04) (1.15)
=================================================================================================================================
Redemptions fees added to shares of
beneficial interest 0.00 0.00 0.00 -- -- --
=================================================================================================================================
Net asset value, end of period $ 15.23 $ 15.10 $ 13.15 $ 9.71 $ 10.80 $ 13.12
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 0.86% 21.06% 36.90% (10.09)% (17.36)% (8.30)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $87,537 $74,120 $62,424 $54,029 $81,459 $22,279
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.19%(c) 2.44% 2.50% 2.50% 2.50% 2.50%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.37%(c) 2.46% 2.55% 2.55% 2.75% 2.64%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.88%(c) (0.61)% (1.00)% (0.68)% (1.44)% (1.77)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 76% 115% 178% 80% 154% 260%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$80,649,979.
(d) Not annualized for periods less than one year.
FS-167
NOTE 11--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.08 $ 13.14 $ 9.71 $10.79 $13.11 $15.62
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07(a) (0.09)(a) (0.11)(a) (0.07)(a) (0.16)(a) (0.26)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.06 2.83 3.68 (1.01) (2.12) (1.10)
==============================================================================================================================
Total from investment operations 0.13 2.74 3.57 (1.08) (2.28) (1.36)
==============================================================================================================================
Less distributions:
Dividends from net investment income -- -- -- -- (0.04) --
------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.80) (0.14) -- -- (1.15)
==============================================================================================================================
Total distributions -- (0.80) (0.14) -- (0.04) (1.15)
==============================================================================================================================
Redemptions fees added to shares of
beneficial interest 0.00 0.00 0.00 -- -- --
==============================================================================================================================
Net asset value, end of period $ 15.21 $ 15.08 $13.14 $ 9.71 $10.79 $13.11
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 0.86% 21.00% 36.79% (10.01)% (17.37)% (8.37)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,098 $20,375 $9,993 $4,551 $4,600 $1,789
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 2.19%(c) 2.44% 2.50% 2.50% 2.50% 2.50%
------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 2.37%(c) 2.46% 2.55% 2.55% 2.75% 2.64%
==============================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.88%(c) (0.61)% (1.00)% (0.68)% (1.44)% (1.77)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(d) 76% 115% 178% 80% 154% 260%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(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
$25,548,305.
(d) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------------------
APRIL 30, 2004
SIX MONTHS (DATE SALES
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
---------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.73 $ 13.98
---------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16(a) 0.07(a)
---------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.07 2.48
=============================================================================================
Total from investment operations 0.23 2.55
=============================================================================================
Less distributions from net realized gains -- (0.80)
---------------------------------------------------------------------------------------------
Redemptions fees added to shares of beneficial interest 0.00 0.00
=============================================================================================
Net asset value, end of period $ 15.96 $ 15.73
_____________________________________________________________________________________________
=============================================================================================
Total return(b) 1.46% 18.39%
_____________________________________________________________________________________________
=============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,335 $13,158
_____________________________________________________________________________________________
=============================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.00%(c) 1.18%(d)
---------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.18%(c) 1.20%(d)
=============================================================================================
Ratio of net investment income to average net assets 2.07%(c) 0.65%(d)
_____________________________________________________________________________________________
=============================================================================================
Portfolio turnover rate(e) 76% 115%
_____________________________________________________________________________________________
=============================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$21,849,474.
(d) Not annualized for periods less than one year.
(e) Annualized.
FS-168
NOTE 12--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec.46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-169
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MUTUAL FUNDS-100.05%(A)
AIM Dynamics Fund-Institutional
Class-5.04%(b) 483,893 $ 8,221,334
-----------------------------------------------------------------------
AIM High Yield Fund-Institutional Class-5.04% 1,845,212 8,211,192
-----------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-12.44% 1,799,255 20,277,605
-----------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-12.47%(b) 989,447 20,333,137
-----------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-17.44%(b) 2,100,311 28,438,215
-----------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-20.00%(b) 3,296,160 32,599,024
-----------------------------------------------------------------------
|
MARKET
SHARES VALUE
-----------------------------------------------------------------------
MUTUAL FUNDS-(CONTINUED)
AIM Multi-Sector Fund-Institutional
Class-12.47% 887,812 $ 20,322,022
-----------------------------------------------------------------------
AIM Real Estate Fund-Institutional
Class-5.03% 302,716 8,206,619
-----------------------------------------------------------------------
AIM Small Cap Growth Fund-Institutional
Class-10.12%(b) 580,102 16,492,310
=======================================================================
TOTAL INVESTMENTS-100.05% (Cost $155,102,245) 163,101,458
=======================================================================
OTHER ASSETS LESS LIABILITIES-(0.05%) (85,497)
=======================================================================
NET ASSETS-100.00% $163,015,961
_______________________________________________________________________
=======================================================================
|
Notes to Schedule of Investments:
(a) The mutual funds and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than one
year from the report date.
See accompanying notes which are an integral part of the financial statements.
FS-170
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments in affiliated underlying funds,
at market value (cost $155,102,245) $163,101,458
-----------------------------------------------------------
Cash 60,140
-----------------------------------------------------------
Receivables for:
Fund shares sold 575,932
-----------------------------------------------------------
Dividends 49,283
-----------------------------------------------------------
Fund expenses absorbed 10,177
-----------------------------------------------------------
Investment for trustee deferred
compensation and retirement plans 2,907
-----------------------------------------------------------
Other assets 53,900
===========================================================
Total assets 163,853,797
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 670,802
-----------------------------------------------------------
Fund shares reacquired 14,555
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 3,547
-----------------------------------------------------------
Accrued distribution fees 82,337
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 116
-----------------------------------------------------------
Accrued transfer agent fees 32,832
-----------------------------------------------------------
Accrued operating expenses 33,647
===========================================================
Total liabilities 837,836
===========================================================
Net assets applicable to shares outstanding $163,015,961
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $154,688,239
-----------------------------------------------------------
Undistributed net investment income (loss) (193,396)
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 521,905
-----------------------------------------------------------
Unrealized appreciation of investment
securities 7,999,213
===========================================================
$163,015,961
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 83,246,742
___________________________________________________________
===========================================================
Class B $ 46,793,430
___________________________________________________________
===========================================================
Class C $ 24,932,668
___________________________________________________________
===========================================================
Class R $ 7,928,668
___________________________________________________________
===========================================================
Institutional Class $ 114,453
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 7,337,057
___________________________________________________________
===========================================================
Class B 4,148,602
___________________________________________________________
===========================================================
Class C 2,211,057
___________________________________________________________
===========================================================
Class R 700,080
___________________________________________________________
===========================================================
Institutional Class 10,057
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.35
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.35 divided
by 94.50%) $ 12.01
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 11.28
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 11.28
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 11.33
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 11.38
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-171
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 297,423
========================================================================
EXPENSES:
Administrative services fees 24,795
------------------------------------------------------------------------
Custodian fees 4,129
------------------------------------------------------------------------
Distribution fees:
Class A 105,890
------------------------------------------------------------------------
Class B 174,219
------------------------------------------------------------------------
Class C 90,753
------------------------------------------------------------------------
Class R 15,576
------------------------------------------------------------------------
Market timing and litigation expenses 38,425
------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 162,109
------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 4
------------------------------------------------------------------------
Trustees' and officer's fees and benefits 7,994
------------------------------------------------------------------------
Registration and filing fees 73,425
------------------------------------------------------------------------
Other 49,274
========================================================================
Total expenses 746,593
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (257,708)
========================================================================
Net expenses 488,885
========================================================================
Net investment income (loss) (191,462)
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 374,241
========================================================================
Change in net unrealized appreciation of affiliated
underlying funds 2,034,659
========================================================================
Net gain from affiliated underlying funds 2,408,900
========================================================================
Net increase in net assets resulting from operations $2,217,438
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-172
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the period April 30, 2004
(Date operations commenced) through December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) from affiliated underlying
funds $ (191,462) $ 18,446
------------------------------------------------------------------------------------------
Net realized gain from affiliated underlying funds 374,241 350,300
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 2,034,659 5,964,554
==========================================================================================
Net increase in net assets resulting from operations 2,217,438 6,333,300
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (166,197)
------------------------------------------------------------------------------------------
Class B -- (56,952)
------------------------------------------------------------------------------------------
Class C -- (29,244)
------------------------------------------------------------------------------------------
Class R -- (5,483)
------------------------------------------------------------------------------------------
Institutional Class -- (617)
==========================================================================================
Total distributions from net investment income -- (258,493)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (3,264)
------------------------------------------------------------------------------------------
Class B -- (1,898)
------------------------------------------------------------------------------------------
Class C -- (975)
------------------------------------------------------------------------------------------
Class R -- (119)
------------------------------------------------------------------------------------------
Institutional Class -- (10)
==========================================================================================
Total distributions from net realized gains -- (6,266)
==========================================================================================
Decrease in net assets resulting from distributions -- (264,759)
==========================================================================================
Share transactions-net:
Class A 42,672,084 36,288,349
------------------------------------------------------------------------------------------
Class B 23,868,897 20,477,991
------------------------------------------------------------------------------------------
Class C 13,078,949 10,599,924
------------------------------------------------------------------------------------------
Class R 6,427,772 1,215,379
------------------------------------------------------------------------------------------
Institutional Class -- 100,637
==========================================================================================
Net increase in net assets resulting from share
transactions 86,047,702 68,682,280
==========================================================================================
Net increase in net assets 88,265,140 74,750,821
==========================================================================================
NET ASSETS:
Beginning of period 74,750,821 --
==========================================================================================
End of period (including undistributed net investment
income (loss) of $(193,396) and $(1,934), respectively) $163,015,961 $74,750,821
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-173
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Growth Allocation Fund, formerly AIM Aggressive Allocation Fund, (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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 consistent with a higher level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign
FS-174
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds.
AIM has contractually agreed to reimburse expenses to the extent necessary
to limit other expenses (excluding certain items discussed below) of Class A,
Class B, Class C, Class R and Institutional Class shares to 0.17% of average
daily net assets, respectively, through December 31, 2005. In determining the
advisor's obligation to reimburse expenses, the following expenses are not taken
into account, and could cause other expenses to exceed the limit stated above:
(i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend
expense on short sales; (v) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (vi) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses
of the underlying funds that are paid indirectly as a result of share ownership
of the underlying funds; and (viii) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year.
For the six months ended June 30, 2005, AIM waived fees of $57,170 and reimbursed expenses of $160,517.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $38,425.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $24,795.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $162,109 for Class A, Class B, Class C and Class R share classes and $4 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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
FS-175
the average daily net assets of Class R shares. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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 June 30, 2005, the Class A, Class B, Class C and Class R shares paid $105,890, $174,219, $90,753 and $15,576, 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 June 30, 2005, ADI advised the Fund that it retained $122,488 in front-end sales commissions from the sale of Class A shares and $4, $12,448, $3,469 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to ADI for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the six months ended June 30, 2005.
INVESTMENTS IN AFFILIATES:
CHANGE IN
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
AIM Dynamics
Fund-
Institutional
Class $ 3,781,016 $ 4,312,664 $ (46,313) $ 170,016 $ 8,221,334 $ -- $ 3,951
----------------------------------------------------------------------------------------------------------------------------------
AIM High Yield
Fund-
Institutional
Class 3,610,019 4,734,403 (29,663) (104,222) 8,211,192 210,308 655
----------------------------------------------------------------------------------------------------------------------------------
AIM
International
Core Equity
Fund-
Institutional
Class 9,502,721 11,130,717 (76,549) (288,903) 20,277,605 -- 9,619
----------------------------------------------------------------------------------------------------------------------------------
AIM
International
Growth Fund-
Institutional
Class 9,688,825 10,781,660 (349,398) 145,678 20,333,137 -- 66,372
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Basic Value
Fund-
Institutional
Class 12,836,834 15,535,845 (104,858) 165,608 28,438,215 -- 4,786
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Growth Fund-
Institutional
Class 14,582,137 17,939,362 (117,929) 190,134 32,599,024 -- 5,320
----------------------------------------------------------------------------------------------------------------------------------
AIM
Multi-Sector
Fund-
Institutional
Class 9,340,168 10,781,660 (778,195) 871,600 20,322,022 -- 106,789
----------------------------------------------------------------------------------------------------------------------------------
AIM Real Estate
Fund-
Institutional
Class 3,967,454 4,399,934 (693,024) 363,441 8,206,619 87,115 168,814
----------------------------------------------------------------------------------------------------------------------------------
AIM Small Cap
Growth Fund-
Institutional
Class 7,438,317 8,625,328 (100,577) 521,307 16,492,310 -- 7,935
==================================================================================================================================
Total $74,747,491 $88,241,573 $(2,296,506) $2,034,659 $163,101,458 $297,423 $374,241
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended June 30, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $1,596.
FS-176
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $2,116 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
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 June 30, 2005, the Fund did not 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 SSB, 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 at 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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2004.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the six months ended June 30, 2005 was $88,241,573 and $2,296,506, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $7,995,102 ============================================================================== Net unrealized appreciation of investment securities $7,995,102 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $155,106,356. |
FS-177
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 certain 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
------------------------------------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
COMMENCED) TO
SIX MONTHS ENDED DECEMBER 31,
JUNE 30, 2005 2004
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
Sold:
Class A 4,149,814 $46,096,603 3,574,709 $37,105,068
------------------------------------------------------------------------------------------------------------------
Class B 2,467,357 27,313,855 2,065,422 21,235,832
------------------------------------------------------------------------------------------------------------------
Class C 1,301,152 14,385,668 1,082,947 11,184,543
------------------------------------------------------------------------------------------------------------------
Class R 620,367 6,870,639 142,688 1,465,707
------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 10,001 100,010
==================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 14,820 164,949
------------------------------------------------------------------------------------------------------------------
Class B -- -- 5,195 57,658
------------------------------------------------------------------------------------------------------------------
Class C -- -- 2,647 29,375
------------------------------------------------------------------------------------------------------------------
Class R -- -- 504 5,602
------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 56 627
==================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 93,076 1,031,746 14,680 152,114
------------------------------------------------------------------------------------------------------------------
Class B (93,518) (1,031,746) (14,728) (152,114)
==================================================================================================================
Reacquired:
Class A (401,309) (4,456,265) (108,733) (1,133,782)
------------------------------------------------------------------------------------------------------------------
Class B (218,151) (2,413,212) (62,975) (663,385)
------------------------------------------------------------------------------------------------------------------
Class C (117,993) (1,306,719) (57,696) (613,994)
------------------------------------------------------------------------------------------------------------------
Class R (39,639) (442,867) (23,840) (255,930)
==================================================================================================================
7,761,156 $86,047,702 6,645,697 $68,682,280
__________________________________________________________________________________________________________________
==================================================================================================================
|
FS-178
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A
------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.26 $ 10.00
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.00)(a) 0.03(a)
--------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.09 1.28
==================================================================================================
Total from investment operations 0.09 1.31
==================================================================================================
Less distributions:
Dividends from net investment income -- (0.05)
--------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
==================================================================================================
Total distributions -- (0.05)
==================================================================================================
Net asset value, end of period $ 11.35 $ 11.26
__________________________________________________________________________________________________
==================================================================================================
Total return(b) 0.80% 13.12%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $83,247 $39,368
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.52%(c) 0.52%(d)
--------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.95%(c) 1.31%(d)
==================================================================================================
Estimated underlying fund expenses(e) 0.96% 0.96%
==================================================================================================
Ratio of net investment income to average net assets (0.02)%(c) 0.40%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(f) 2% 2%
__________________________________________________________________________________________________
==================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$61,010,223.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-179
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.23 $ 10.00
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.02)(a)
--------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.09 1.28
==================================================================================================
Total from investment operations 0.05 1.26
==================================================================================================
Less distributions:
Dividends from net investment income -- (0.03)
--------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
==================================================================================================
Total distributions -- (0.03)
==================================================================================================
Net asset value, end of period $ 11.28 $ 11.23
__________________________________________________________________________________________________
==================================================================================================
Total return(b) 0.45% 12.61%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,793 $22,384
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.17%(c) 1.17%(d)
--------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.60%(c) 1.96%(d)
==================================================================================================
Estimated underlying fund expenses(e) 0.96% 0.96%
==================================================================================================
Ratio of net investment income (loss) to average net assets (0.67)%(c) (0.25)%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(f) 2% 2%
__________________________________________________________________________________________________
==================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$35,132,637.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-180
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.23 $ 10.00
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.02)(a)
--------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.09 1.28
==================================================================================================
Total from investment operations 0.05 1.26
==================================================================================================
Less distributions:
Dividends from net investment income -- (0.03)
--------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
==================================================================================================
Total distributions -- (0.03)
==================================================================================================
Net asset value, end of period $ 11.28 $ 11.23
__________________________________________________________________________________________________
==================================================================================================
Total return(b) 0.45% 12.61%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,933 $11,543
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.17%(c) 1.17%(d)
--------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.60%(c) 1.96%(d)
==================================================================================================
Estimated underlying fund expenses(e) 0.96% 0.96%
==================================================================================================
Ratio of net investment income (loss) to average net assets (0.67)%(c) (0.25)%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(f) 2% 2%
__________________________________________________________________________________________________
==================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$18,301,103.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-181
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.25 $10.00
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) 0.02(a)
--------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.09 1.28
==================================================================================================
Total from investment operations 0.08 1.30
==================================================================================================
Less distributions:
Dividends from net investment income -- (0.05)
--------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
==================================================================================================
Total distributions -- (0.05)
==================================================================================================
Net asset value, end of period $11.33 $11.25
__________________________________________________________________________________________________
==================================================================================================
Total return(b) 0.71% 12.98%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $7,929 $1,342
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.67%(c) 0.67%(d)
--------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.10%(c) 1.46%(d)
==================================================================================================
Estimated underlying fund expenses(e) 0.96% 0.96%
==================================================================================================
Ratio of net investment income to average net assets (0.17)%(c) 0.25%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(f) 2% 2%
__________________________________________________________________________________________________
==================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$6,281,830.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-182
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
------------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
--------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.28 $10.00
--------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.02(a) 0.05(a)
--------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.08 1.29
==================================================================================================
Total from investment operations 0.10 1.34
==================================================================================================
Less distributions:
Dividends from net investment income -- (0.06)
--------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
==================================================================================================
Total distributions -- (0.06)
==================================================================================================
Net asset value, end of period $11.38 $11.28
__________________________________________________________________________________________________
==================================================================================================
Total return(b) 0.89% 13.44%
__________________________________________________________________________________________________
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 114 $ 113
__________________________________________________________________________________________________
==================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.17%(c) 0.17%(d)
--------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.34%(c) 0.75%(d)
==================================================================================================
Estimated underlying fund expenses(e) 0.96% 0.96%
==================================================================================================
Ratio of net investment income to average net assets 0.33%(c) 0.75%(d)
__________________________________________________________________________________________________
==================================================================================================
Portfolio turnover rate(f) 2% 2%
__________________________________________________________________________________________________
==================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $112,065.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
FS-183
NOTE 11--LEGAL PROCEEDINGS--(CONTINUED)
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-184
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-84.90%
ADVERTISING-1.32%
Valassis Communications, Inc.(a) 1,338,700 $ 49,598,835
===========================================================================
APPLICATION SOFTWARE-1.99%
Fair Isaac Corp. 1,000,000 36,500,000
---------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A 1,421,400 38,420,442
===========================================================================
74,920,442
===========================================================================
BIOTECHNOLOGY-1.07%
Techne Corp.(a) 879,251 40,366,414
===========================================================================
BREWERS-1.62%
Heineken N.V. (Netherlands)(b) 1,975,462 60,946,425
===========================================================================
CASINOS & GAMING-1.25%
GTECH Holdings Corp. 1,610,300 47,085,172
===========================================================================
COMPUTER HARDWARE-1.35%
Diebold, Inc. 1,125,200 50,757,772
===========================================================================
COMPUTER STORAGE & PERIPHERALS-1.56%
Lexmark International, Inc.-Class A(a) 906,700 58,781,361
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.48%
Ceridian Corp.(a) 1,915,350 37,311,018
---------------------------------------------------------------------------
Sabre Holdings Corp.-Class A 911,000 18,174,450
===========================================================================
55,485,468
===========================================================================
DISTRIBUTORS-0.91%
Genuine Parts Co. 830,900 34,141,681
===========================================================================
DIVERSIFIED CHEMICALS-0.93%
Engelhard Corp. 1,225,000 34,973,750
===========================================================================
ELECTRONIC EQUIPMENT MANUFACTURERS-3.02%
Agilent Technologies, Inc.(a) 1,733,400 39,902,868
---------------------------------------------------------------------------
Amphenol Corp.-Class A 897,200 36,040,524
---------------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 810,400 37,748,432
===========================================================================
113,691,824
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-2.38%
Rentokil Initial PLC (United Kingdom) 18,047,578 51,656,513
---------------------------------------------------------------------------
Republic Services, Inc. 1,046,000 37,666,460
===========================================================================
89,322,973
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-1.00%
Scotts Miracle-Gro Co. (The)-Class A(a) 530,600 37,784,026
===========================================================================
FOOD RETAIL-1.91%
Kroger Co. (The)(a) 3,770,000 71,743,100
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
GENERAL MERCHANDISE STORES-0.66%
Family Dollar Stores, Inc. 952,000 $ 24,847,200
===========================================================================
HEALTH CARE EQUIPMENT-1.32%
Waters Corp.(a) 1,331,300 49,484,421
===========================================================================
HEALTH CARE SERVICES-1.06%
IMS Health Inc. 1,613,200 39,958,964
===========================================================================
HOME FURNISHINGS-2.35%
Ethan Allen Interiors Inc. 1,200,000 40,212,000
---------------------------------------------------------------------------
Mohawk Industries, Inc.(a) 585,600 48,312,000
===========================================================================
88,524,000
===========================================================================
HOME IMPROVEMENT RETAIL-1.05%
Sherwin-Williams Co. (The) 836,100 39,371,949
===========================================================================
INDUSTRIAL MACHINERY-4.95%
Briggs & Stratton Corp. 1,480,200 51,244,524
---------------------------------------------------------------------------
Dover Corp. 1,803,800 65,622,244
---------------------------------------------------------------------------
ITT Industries, Inc. 401,600 39,208,208
---------------------------------------------------------------------------
Pall Corp. 988,200 30,001,752
===========================================================================
186,076,728
===========================================================================
INTEGRATED OIL & GAS-2.45%
Amerada Hess Corp. 345,600 36,809,856
---------------------------------------------------------------------------
Murphy Oil Corp. 1,060,100 55,369,023
===========================================================================
92,178,879
===========================================================================
LEISURE PRODUCTS-1.88%
Mattel, Inc. 3,860,850 70,653,555
===========================================================================
METAL & GLASS CONTAINERS-1.76%
Ball Corp. 854,800 30,738,608
---------------------------------------------------------------------------
Pactiv Corp.(a) 1,650,000 35,607,000
===========================================================================
66,345,608
===========================================================================
MULTI-UTILITIES-1.07%
Wisconsin Energy Corp. 1,034,100 40,329,900
===========================================================================
OFFICE ELECTRONICS-1.77%
Xerox Corp.(a) 4,824,800 66,533,992
===========================================================================
OFFICE SERVICES & SUPPLIES-0.93%
Pitney Bowes Inc. 800,000 34,840,000
===========================================================================
OIL & GAS DRILLING-2.28%
Nabors Industries, Ltd. (Bermuda)(a) 725,420 43,974,960
---------------------------------------------------------------------------
Noble Corp. (Cayman Islands) 677,300 41,660,723
===========================================================================
85,635,683
===========================================================================
|
FS-185
MARKET
SHARES VALUE
---------------------------------------------------------------------------
OIL & GAS EQUIPMENT & SERVICES-4.72%
BJ Services Co. 1,393,100 $ 73,109,888
---------------------------------------------------------------------------
FMC Technologies, Inc.(a) 1,627,500 52,031,175
---------------------------------------------------------------------------
Smith International, Inc. 821,150 52,307,255
===========================================================================
177,448,318
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-3.93%
Newfield Exploration Co.(a) 950,100 37,899,489
---------------------------------------------------------------------------
Plains Exploration & Production Co.(a) 1,242,000 44,128,260
---------------------------------------------------------------------------
Southwestern Energy Co.(a) 1,401,000 65,818,980
===========================================================================
147,846,729
===========================================================================
OIL & GAS STORAGE & TRANSPORTATION-2.37%
Williams Cos., Inc. (The) 4,691,500 89,138,500
===========================================================================
PACKAGED FOODS & MEATS-2.39%
Campbell Soup Co. 1,224,300 37,671,711
---------------------------------------------------------------------------
Tate & Lyle PLC (United Kingdom)(b) 6,100,000 52,017,547
===========================================================================
89,689,258
===========================================================================
PAPER PRODUCTS-1.18%
Georgia-Pacific Corp. 1,396,000 44,392,800
===========================================================================
PHARMACEUTICALS-2.27%
Forest Laboratories, Inc.(a) 1,277,800 49,642,530
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR
(Israel) 1,144,000 35,624,160
===========================================================================
85,266,690
===========================================================================
PROPERTY & CASUALTY INSURANCE-2.03%
ACE Ltd. (Cayman Islands) 855,100 38,351,235
---------------------------------------------------------------------------
Axis Capital Holding Ltd. (Bermuda) 1,338,200 37,871,060
===========================================================================
76,222,295
===========================================================================
PUBLISHING-2.66%
Belo Corp.-Class A 2,035,200 48,783,744
---------------------------------------------------------------------------
Knight-Ridder, Inc. 833,100 51,102,354
===========================================================================
99,886,098
===========================================================================
REGIONAL BANKS-3.16%
City National Corp. 425,700 30,526,947
---------------------------------------------------------------------------
Compass Bancshares, Inc. 613,000 27,585,000
---------------------------------------------------------------------------
Marshall & Ilsley Corp. 690,000 30,670,500
---------------------------------------------------------------------------
TCF Financial Corp. 1,168,000 30,227,840
===========================================================================
119,010,287
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
REINSURANCE-1.96%
Montpelier Re Holdings Ltd. (Bermuda) 1,074,400 $ 37,152,752
---------------------------------------------------------------------------
Renaissance Re Holdings Ltd. (Bermuda) 742,000 36,536,080
===========================================================================
73,688,832
===========================================================================
RESTAURANTS-0.99%
Outback Steakhouse, Inc. 826,000 37,368,240
===========================================================================
SEMICONDUCTORS-2.98%
International Rectifier Corp.(a) 841,000 40,132,520
---------------------------------------------------------------------------
National Semiconductor Corp. 1,813,600 39,953,608
---------------------------------------------------------------------------
Xilinx, Inc. 1,259,000 32,104,500
===========================================================================
112,190,628
===========================================================================
SPECIALIZED CONSUMER SERVICES-2.60%
H&R Block, Inc. 742,000 43,295,700
---------------------------------------------------------------------------
Service Corp. International 6,798,000 54,519,960
===========================================================================
97,815,660
===========================================================================
SPECIALTY CHEMICALS-4.04%
International Flavors & Fragrances Inc. 1,370,900 49,653,998
---------------------------------------------------------------------------
Rohm and Haas Co. 850,000 39,389,000
---------------------------------------------------------------------------
Sigma-Aldrich Corp. 1,121,000 62,820,840
===========================================================================
151,863,838
===========================================================================
SYSTEMS SOFTWARE-1.27%
Computer Associates International, Inc. 1,739,600 47,804,208
===========================================================================
THRIFTS & MORTGAGE FINANCE-1.03%
New York Community Bancorp, Inc. 2,131,200 38,617,344
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $2,712,990,175) 3,192,629,847
===========================================================================
MONEY MARKET FUNDS-15.22%
Liquid Assets Portfolio-Institutional
Class(c) 286,266,172 286,266,172
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 286,266,173 286,266,173
===========================================================================
Total Money Market Funds (Cost
$572,532,345) 572,532,345
===========================================================================
TOTAL INVESTMENTS-100.12% (Cost
$3,285,522,520) 3,765,162,192
===========================================================================
OTHER ASSETS LESS LIABILITIES-(0.12%) (4,521,762)
===========================================================================
NET ASSETS-100.00% $3,760,640,430
___________________________________________________________________________
===========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) In accordance with the procedures established by the Board of Trustees,
the foreign security is fair valued using adjusted closing market
prices. The aggregate market value of these securities at June 30, 2005
was $112,963,972, which represented 3.00% of the Fund's Total
Investments. See Note 1A.
(c) 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-186
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$2,712,990,175) $3,192,629,847
------------------------------------------------------------
Investments in affiliated money market funds
(cost $572,532,345) 572,532,345
============================================================
Total investments (cost $3,285,522,520) 3,765,162,192
============================================================
Foreign currencies, at market value (cost
$10,288) 10,320
------------------------------------------------------------
Receivables for:
Fund shares sold 5,294,371
------------------------------------------------------------
Dividends 3,781,043
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 75,747
------------------------------------------------------------
Other assets 114,398
============================================================
Total assets 3,774,438,071
____________________________________________________________
============================================================
LIABILITIES:
Payables for:
Investments purchased 1,273,049
------------------------------------------------------------
Fund shares reacquired 9,827,208
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 177,016
------------------------------------------------------------
Accrued distribution fees 1,323,178
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 470
------------------------------------------------------------
Accrued transfer agent fees 973,564
------------------------------------------------------------
Accrued operating expenses 223,156
============================================================
Total liabilities 13,797,641
============================================================
Net assets applicable to shares outstanding $3,760,640,430
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,044,279,399
------------------------------------------------------------
Undistributed net investment income (loss) (440,485)
------------------------------------------------------------
Undistributed net realized gain from
investment securities and foreign
currencies 237,161,814
------------------------------------------------------------
Unrealized appreciation of investment
securities and foreign currencies 479,639,702
============================================================
$3,760,640,430
____________________________________________________________
============================================================
NET ASSETS:
Class A $2,685,301,578
____________________________________________________________
============================================================
Class B $ 641,076,679
____________________________________________________________
============================================================
Class C $ 301,575,909
____________________________________________________________
============================================================
Class R $ 75,675,527
____________________________________________________________
============================================================
Institutional Class $ 57,010,737
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 92,222,083
____________________________________________________________
============================================================
Class B 24,599,433
____________________________________________________________
============================================================
Class C 11,585,813
____________________________________________________________
============================================================
Class R 2,611,755
____________________________________________________________
============================================================
Institutional Class 1,918,996
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 29.12
------------------------------------------------------------
Offering price per share:
(Net asset value of $29.12 divided by
94.50%) $ 30.81
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 26.06
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 26.03
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 28.97
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 29.71
____________________________________________________________
============================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-187
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $104,745) $ 19,201,537
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $6,870) 7,256,696
==========================================================================
Total investment income 26,458,233
==========================================================================
EXPENSES:
Advisory fees 12,184,210
--------------------------------------------------------------------------
Administrative services fees 297,505
--------------------------------------------------------------------------
Custodian fees 147,444
--------------------------------------------------------------------------
Distribution fees:
Class A 4,457,921
--------------------------------------------------------------------------
Class B 3,296,010
--------------------------------------------------------------------------
Class C 1,535,550
--------------------------------------------------------------------------
Class R 169,470
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 5,642,185
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 18,375
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 56,323
--------------------------------------------------------------------------
Other 408,924
==========================================================================
Total expenses 28,213,917
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (1,419,045)
==========================================================================
Net expenses 26,794,872
==========================================================================
Net investment income (loss) (336,639)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES:
Net realized gain from:
Investment securities (includes gains from securities sold
to affiliates of $7,334,807) 143,499,624
--------------------------------------------------------------------------
Foreign currencies 125,355
==========================================================================
143,624,979
==========================================================================
Change in net unrealized appreciation (depreciation) of:
Investment securities (86,268,410)
--------------------------------------------------------------------------
Foreign currencies (2,543)
==========================================================================
(86,270,953)
==========================================================================
Net gain from investment securities and foreign currencies 57,354,026
==========================================================================
Net increase in net assets resulting from operations $ 57,017,387
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-188
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (336,639) $ (8,247,388)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities and foreign
currencies 143,624,979 366,745,260
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies (86,270,953) 79,257,539
==============================================================================================
Net increase in net assets resulting from operations 57,017,387 437,755,411
==============================================================================================
Distributions to shareholders from net realized gains:
Class A -- (165,796,542)
----------------------------------------------------------------------------------------------
Class B -- (50,732,936)
----------------------------------------------------------------------------------------------
Class C -- (23,417,554)
----------------------------------------------------------------------------------------------
Class R -- (3,882,376)
----------------------------------------------------------------------------------------------
Institutional Class -- (3,241,989)
==============================================================================================
Decrease in net assets resulting from distributions -- (247,071,397)
==============================================================================================
Share transactions-net:
Class A 89,833,179 390,359,539
----------------------------------------------------------------------------------------------
Class B (68,928,062) (34,584,177)
----------------------------------------------------------------------------------------------
Class C (27,003,728) 6,470,062
----------------------------------------------------------------------------------------------
Class R 13,163,929 31,669,516
----------------------------------------------------------------------------------------------
Institutional Class 4,401,004 23,251,227
==============================================================================================
Net increase in net assets resulting from share
transactions 11,466,322 417,166,167
==============================================================================================
Net increase in net assets 68,483,709 607,850,181
==============================================================================================
NET ASSETS:
Beginning of period 3,692,156,721 3,084,306,540
==============================================================================================
End of period (including undistributed net investment income
(loss) of $(440,485) and $(103,846), respectively) $3,760,640,430 $3,692,156,721
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-189
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Core Equity Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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. As of February 27, 2004, the Fund's shares are offered on a limited basis.
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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing
FS-190
service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. 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.
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.
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $500 million 0.725% ---------------------------------------------------------------------- Next $500 million 0.70% ---------------------------------------------------------------------- Next $500 million 0.675% ---------------------------------------------------------------------- Over $1.5 billion 0.65% ______________________________________________________________________ ====================================================================== |
FS-191
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended June 30, 2005, AIM waived fees of $69,036.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $26,452.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $297,505.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $5,642,185 for Class A, Class B, Class C and Class R share classes and $18,375 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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. Through June 30, 2005, during the periods the Fund was offered on a limited basis, ADI had agreed to waive 0.10% of Rule 12b-1 plan fees on Class A shares. Pursuant to the Plans, for the six months ended June 30, 2005, the Class A, Class B, Class C and Class R shares paid $3,184,229, $3,296,010, $1,535,550 and $169,470 respectively, after ADI waived Plan fees of $1,273,692 for Class A shares.
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 June 30, 2005, ADI advised the Fund that it retained $98,795 in front-end sales commissions from the sale of Class A shares and $4,428, $81,955, $8,427 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 ADI.
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended June 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME
-------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $173,231,587 $336,373,924 $(223,339,339) $ -- $286,266,172 $3,606,751
-------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class 173,231,588 336,373,924 (223,339,339) -- 286,266,173 3,643,075
=========================================================================================================================
Subtotal $346,463,175 $672,747,848 $(446,678,678) $ -- $572,532,345 $7,249,826
_________________________________________________________________________________________________________________________
=========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------
Liquid Assets Portfolio-
Institutional Class $ --
--------------------------
STIC Prime Portfolio-
Institutional Class --
==========================
Subtotal $ --
__________________________
==========================
|
FS-192
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME
-------------------------------------------------------------------------------------------------------------------------
Liquid Assets Portfolio-
Institutional Class $ -- $ 2,916,174 $ (2,916,174) $ -- $ -- $ 3,431
-------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-
Institutional Class -- 2,916,174 (2,916,174) -- -- 3,439
=========================================================================================================================
Subtotal $ -- $ 5,832,348 $ (5,832,348) $ -- $ -- $ 6,870
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total $346,463,175 $678,580,196 $(452,511,026) $ -- $572,532,345 $7,256,696
_________________________________________________________________________________________________________________________
=========================================================================================================================
REALIZED
FUND GAIN (LOSS)
--------------------------
Liquid Assets Portfolio-
Institutional Class $ --
--------------------------
STIC Prime Portfolio-
Institutional Class --
==========================
Subtotal $ --
__________________________
==========================
Total $ --
__________________________
==========================
|
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended June 30, 2005, the Fund engaged in securities purchases of $17,588,109 and sales of $44,517,360, which resulted in net realized gains of $7,334,807.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended June 30, 2005, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $49,865.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $8,840 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 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 June 30, 2005, the Fund did not borrow or lend under the interfund lending facility or borrow under the uncommitted unsecured revolving credit facility.
FS-193
Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in its account with SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 June 30, 2005, there were no securities on loan to brokers. For the six months ended June 30, 2005, the Fund received dividends on cash collateral of $6,870 for securities lending transactions.
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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2004.
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 June 30, 2005 was $862,126,083 and $1,075,063,329 respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $505,887,863 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (29,508,131) ============================================================================== Net unrealized appreciation of investment securities $476,379,732 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $3,288,782,460. |
FS-194
NOTE 11--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 certain circumstances, Class A 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(a)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 15,135,080 $ 432,453,908 26,967,314 $ 758,954,877
--------------------------------------------------------------------------------------------------------------------------
Class B 524,056 13,397,623 2,582,107 65,607,722
--------------------------------------------------------------------------------------------------------------------------
Class C 507,970 12,964,472 2,143,852 54,462,214
--------------------------------------------------------------------------------------------------------------------------
Class R 741,835 21,059,982 1,569,932 44,033,714
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 363,496 10,580,672 1,058,147 30,243,199
==========================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 5,671,172 160,721,002
--------------------------------------------------------------------------------------------------------------------------
Class B -- -- 1,875,385 47,766,053
--------------------------------------------------------------------------------------------------------------------------
Class C -- -- 867,525 22,069,827
--------------------------------------------------------------------------------------------------------------------------
Class R -- -- 130,679 3,690,363
--------------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 112,239 3,236,984
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 546,371 15,565,730 1,357,549 38,348,118
--------------------------------------------------------------------------------------------------------------------------
Class B (609,389) (15,565,730) (1,495,064) (38,348,118)
==========================================================================================================================
Reacquired:
Class A (12,551,831) (358,186,459) (20,151,373) (567,664,458)
--------------------------------------------------------------------------------------------------------------------------
Class B (2,609,609) (66,759,955) (4,286,417) (109,609,834)
--------------------------------------------------------------------------------------------------------------------------
Class C (1,561,946) (39,968,200) (2,745,120) (70,061,979)
--------------------------------------------------------------------------------------------------------------------------
Class R (278,055) (7,896,053) (567,140) (16,054,561)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (213,633) (6,179,668) (358,294) (10,228,956)
==========================================================================================================================
(5,655) $ 11,466,322 14,732,493 $ 417,166,167
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 15% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The trust has no knowledge as to whether all or any portion of the shares owned of record by these entities are also owned beneficially.
FS-195
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 DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 28.64 $ 26.92 $ 21.17 $ 23.85 $ 24.04 $ 23.48
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.03(a) (0.01)(a) (0.08)(a) (0.09)(a) (0.05)(a) 0.10(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.45 3.71 5.83 (2.56) 0.18 4.10
=================================================================================================================================
Total from investment
operations 0.48 3.70 5.75 (2.65) 0.13 4.20
=================================================================================================================================
Less distributions:
Dividends from net investment
income -- -- -- -- (0.02) --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized
gains -- (1.98) -- (0.03) (0.30) (3.64)
=================================================================================================================================
Total distributions -- (1.98) -- (0.03) (0.32) (3.64)
=================================================================================================================================
Net asset value, end of period $ 29.12 $ 28.64 $ 26.92 $ 21.17 $ 23.85 $ 24.04
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.68% 13.82% 27.10% (11.13)% 0.56% 18.76%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,685,302 $2,552,041 $2,025,407 $1,072,673 $490,118 $259,803
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net
assets 1.28%(c)(d) 1.30%(d) 1.41% 1.43% 1.39% 1.37%
=================================================================================================================================
Ratio of net investment income
(loss) to average net assets 0.18%(c) (0.02)% (0.33)% (0.40)% (0.22)% 0.38%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 27% 56% 38% 38% 68% 72%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$2,568,494,359.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.39% (annualized) and 1.40 for the six months ended June 30, 2005
and for the year ended December 31, 2004, respectively.
(e) Not annualized for periods less than one year.
FS-196
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
----------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.73 $ 24.54 $ 19.43 $ 22.03 $ 22.36 $ 22.21
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.19)(a) (0.21)(a) (0.22)(a) (0.19)(a) (0.07)(a)
------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.40 3.36 5.32 (2.35) 0.16 3.86
==============================================================================================================================
Total from investment operations 0.33 3.17 5.11 (2.57) (0.03) 3.79
==============================================================================================================================
Less distributions from net realized
gains -- (1.98) -- (0.03) (0.30) (3.64)
==============================================================================================================================
Net asset value, end of period $ 26.06 $ 25.73 $ 24.54 $ 19.43 $ 22.03 $ 22.36
______________________________________________________________________________________________________________________________
==============================================================================================================================
Total return(b) 1.28% 13.00% 26.30% (11.69)% (0.10)% 17.98%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $641,077 $702,361 $702,267 $500,166 $333,783 $210,608
______________________________________________________________________________________________________________________________
==============================================================================================================================
Ratio of expenses to average net
assets 2.03%(c)(d) 2.04%(d) 2.06% 2.08% 2.05% 2.02%
==============================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.57)%(c) (0.76)% (0.98)% (1.05)% (0.87)% (0.27)%
______________________________________________________________________________________________________________________________
==============================================================================================================================
Portfolio turnover rate(e) 27% 56% 38% 38% 68% 72%
______________________________________________________________________________________________________________________________
==============================================================================================================================
|
(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
$664,664,937.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.04% (annualized) and 2.05% for the six months ended June 30, 2005
and for the year ended December 31, 2004, respectively.
(e) Not annualized for periods less than one year.
CLASS C
--------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.70 $ 24.51 $ 19.41 $ 22.00 $ 22.33 $ 22.19
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07)(a) (0.19)(a) (0.21)(a) (0.22)(a) (0.19)(a) (0.07)(a)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.40 3.36 5.31 (2.34) 0.16 3.85
============================================================================================================================
Total from investment operations 0.33 3.17 5.10 (2.56) (0.03) 3.78
============================================================================================================================
Less distributions from net realized
gains -- (1.98) -- (0.03) (0.30) (3.64)
============================================================================================================================
Net asset value, end of period $ 26.03 $ 25.70 $ 24.51 $ 19.41 $ 22.00 $ 22.33
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(b) 1.28% 13.01% 26.28% (11.66)% (0.10)% 17.95%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $301,576 $324,873 $303,296 $161,487 $68,085 $19,466
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net
assets 2.03%(c)(d) 2.04%(d) 2.06% 2.08% 2.05% 2.02%
============================================================================================================================
Ratio of net investment income
(loss) to average net assets (0.57)%(c) (0.76)% (0.98)% (1.05)% (0.87)% (0.27)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 27% 56% 38% 38% 68% 72%
____________________________________________________________________________________________________________________________
============================================================================================================================
|
(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
$309,655,071.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 2.04% (annualized) and 2.05 for the six months ended June 30, 2005
and for the year ended December 31, 2004, respectively.
(e) Not annualized for periods less than one year.
FS-197
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
----------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 28.54 $ 26.89 $ 21.18 $ 24.54
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.07)(a) (0.12)(a) (0.07)(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.44 3.70 5.83 (3.26)
==================================================================================================================
Total from investment operations 0.43 3.63 5.71 (3.33)
==================================================================================================================
Less distributions from net realized gains -- (1.98) -- (0.03)
==================================================================================================================
Net asset value, end of period $ 28.97 $ 28.54 $ 26.89 $ 21.18
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 1.51% 13.57% 26.96% (13.59)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $75,676 $61,303 $27,281 $ 2,786
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 1.53%(c)(d) 1.54%(d) 1.56% 1.58%(e)
==================================================================================================================
Ratio of net investment income (loss) to average net assets (0.07)%(c) (0.26)% (0.48)% (0.55)%(e)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(f) 27% 56% 38% 38%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$68,349,969.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.54% (annualized) and 1.55 for the six months ended June 30, 2005
and for the year ended December 31, 2004, respectively.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
----------------------------------------------------
MARCH 15,
2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ------------------ DECEMBER 31,
2005 2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 29.15 $ 27.23 $ 21.27 $ 25.03
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10(a) 0.14(a) 0.08(a) 0.04(a)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.46 3.76 5.88 (3.77)
==================================================================================================================
Total from investment operations 0.56 3.90 5.96 (3.73)
==================================================================================================================
Less distributions from net realized gains -- (1.98) -- (0.03)
==================================================================================================================
Net asset value, end of period $ 29.71 $ 29.15 $ 27.23 $ 21.27
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 1.92% 14.40% 28.02% (14.92)%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $57,011 $51,579 $26,056 $ 4,817
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets 0.78%(c)(d) 0.80%(d) 0.76% 0.82%(e)
==================================================================================================================
Ratio of net investment income to average net assets 0.68%(c) 0.48% 0.32% 0.21%(e)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(f) 27% 56% 38% 38%
__________________________________________________________________________________________________________________
==================================================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$53,507,801.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.79% (annualized) and 0.81 for the six months ended June 30, 2005
and for the year ended December 31, 2004, respectively.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-198
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
FS-199
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-200
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------------
MUTUAL FUNDS-100.05%(A)
AIM High Yield Fund-Institutional
Class-10.07% 6,863,880 $ 30,544,266
------------------------------------------------------------------------
AIM International Core Equity Fund-
Institutional Class-9.95%(b) 2,676,769 30,167,190
------------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-7.48%(b) 1,104,011 22,687,432
------------------------------------------------------------------------
AIM Large Cap Basic Value
Fund-Institutional Class-9.97%(b) 2,231,928 30,220,306
------------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-12.50%(b) 3,831,126 37,889,841
------------------------------------------------------------------------
AIM Mid Cap Basic Value Fund-Institutional
Class-5.04%(b) 1,131,803 15,279,346
------------------------------------------------------------------------
AIM Mid Cap Stock Fund-Institutional
Class-5.04% 835,705 15,268,325
------------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------------
MUTUAL FUNDS-100.05%(A)-(continued)
AIM Multi-Sector Fund-Institutional
Class-4.99% 660,410 $ 15,116,788
------------------------------------------------------------------------
AIM Short Term Bond Fund-
Institutional-Class 4.99% 1,518,318 15,137,627
------------------------------------------------------------------------
AIM Total Return Bond Fund-Institutional
Class-24.97% 7,155,178 75,701,779
------------------------------------------------------------------------
AIM Trimark Small Companies
Fund-Institutional Class-5.05% 1,140,329 15,303,216
========================================================================
TOTAL INVESTMENTS-100.05%
(Cost $292,706,416) 303,316,116
========================================================================
OTHER ASSETS LESS LIABILITIES-(0.05%) (140,575)
========================================================================
NET ASSETS-100.00% $303,175,541
________________________________________________________________________
========================================================================
|
Notes to Schedule of Investments:
(a)
The mutual funds and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b)
Non-income producing security. A security is determined to be non-income producing if the security has not declared a distribution in more than one year from the report date.
See accompanying notes which are an integral part of the financial statements.
FS-201
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments in affiliated underlying funds,
at market value (cost $292,706,416) $303,316,116
-----------------------------------------------------------
Cash 53,051
-----------------------------------------------------------
Receivables for:
Fund shares sold 990,897
-----------------------------------------------------------
Dividends 450,942
-----------------------------------------------------------
Fund expenses absorbed 31,459
-----------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 3,801
-----------------------------------------------------------
Other assets 62,698
===========================================================
Total assets 304,908,964
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 1,316,263
-----------------------------------------------------------
Fund shares reacquired 178,641
-----------------------------------------------------------
Trustee deferred compensation and
retirement plans 5,199
-----------------------------------------------------------
Accrued distribution fees 161,254
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 540
-----------------------------------------------------------
Accrued transfer agent fees 33,684
-----------------------------------------------------------
Accrued operating expenses 37,842
===========================================================
Total liabilities 1,733,423
===========================================================
Net assets applicable to shares outstanding $303,175,541
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $290,729,855
-----------------------------------------------------------
Undistributed net investment income 1,137,281
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 698,705
-----------------------------------------------------------
Unrealized appreciation of investment
securities 10,609,700
===========================================================
$303,175,541
___________________________________________________________
===========================================================
NET ASSETS:
Class A $147,144,862
___________________________________________________________
===========================================================
Class B $ 90,583,401
___________________________________________________________
===========================================================
Class C $ 56,822,427
___________________________________________________________
===========================================================
Class R $ 8,490,525
___________________________________________________________
===========================================================
Institutional Class $ 134,326
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 13,357,974
___________________________________________________________
===========================================================
Class B 8,268,849
___________________________________________________________
===========================================================
Class C 5,186,925
___________________________________________________________
===========================================================
Class R 771,765
___________________________________________________________
===========================================================
Institutional Class 12,158
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 11.02
-----------------------------------------------------------
Offering price per share:
(Net asset value of $11.02 divided by
94.50%) $ 11.66
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per
share $ 10.95
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per
share $ 10.95
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per
share $ 11.00
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per
share $ 11.05
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-202
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends from affiliated underlying funds $1,950,294
========================================================================
EXPENSES:
Administrative services fees 45,686
------------------------------------------------------------------------
Custodian fees 4,171
------------------------------------------------------------------------
Distribution fees:
Class A 188,363
------------------------------------------------------------------------
Class B 340,360
------------------------------------------------------------------------
Class C 218,046
------------------------------------------------------------------------
Class R 13,399
------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 214,246
------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 5
------------------------------------------------------------------------
Trustees' and officer's fees and benefits 9,186
------------------------------------------------------------------------
Registration and filing fees 78,619
------------------------------------------------------------------------
Other 53,057
========================================================================
Total expenses 1,165,138
========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (347,623)
========================================================================
Net expenses 817,515
========================================================================
Net investment income 1,132,779
========================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 563,857
------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 2,186,602
========================================================================
Net gain from affiliated underlying funds 2,750,459
========================================================================
Net increase in net assets resulting from operations $3,883,238
________________________________________________________________________
========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-203
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the period April 30, 2004 (Date
operations commenced) through December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 1,132,779 $ 512,504
------------------------------------------------------------------------------------------
Net realized gain from affiliated underlying funds and
capital gain distributions of underlying funds 563,857 638,318
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 2,186,602 8,423,098
==========================================================================================
Net increase in net assets resulting from operations 3,883,238 9,573,920
==========================================================================================
Distributions to shareholders from net investment income:
Class A -- (574,401)
------------------------------------------------------------------------------------------
Class B -- (294,431)
------------------------------------------------------------------------------------------
Class C -- (174,411)
------------------------------------------------------------------------------------------
Class R -- (16,807)
------------------------------------------------------------------------------------------
Institutional Class -- (1,044)
==========================================================================================
Total distributions from net investment income -- (1,061,094)
==========================================================================================
Distributions to shareholders from net realized gains:
Class A -- (4,300)
------------------------------------------------------------------------------------------
Class B -- (2,835)
------------------------------------------------------------------------------------------
Class C -- (1,679)
------------------------------------------------------------------------------------------
Class R -- (132)
------------------------------------------------------------------------------------------
Institutional Class -- (7)
==========================================================================================
Total distributions from net realized gains -- (8,953)
==========================================================================================
Decrease in net assets resulting from distributions -- (1,070,047)
==========================================================================================
Share transactions-net:
Class A 73,645,755 67,422,298
------------------------------------------------------------------------------------------
Class B 43,709,316 43,220,987
------------------------------------------------------------------------------------------
Class C 28,832,284 25,581,696
------------------------------------------------------------------------------------------
Class R 6,195,791 2,056,769
------------------------------------------------------------------------------------------
Institutional Class 22,473 101,061
==========================================================================================
Net increase in net assets resulting from share
transactions 152,405,619 138,382,811
==========================================================================================
Net increase in net assets 156,288,857 146,886,684
==========================================================================================
NET ASSETS:
Beginning of period 146,886,684 --
==========================================================================================
End of period (including undistributed net investment income
of $1,137,281 and $4,502, respectively) $303,175,541 $146,886,684
__________________________________________________________________________________________
==========================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-204
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Moderate Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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 total return consistent with a moderate level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable 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 underlying funds' net
asset value. If the event is likely to have affected the closing price of
the security, the security will be valued at fair value in good faith using
procedures approved by the underlying funds' Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign security trades is not the current market
value as of the close of the NYSE. Foreign securities meeting the approved
degree of certainty that the price
FS-205
is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds.
AIM has contractually agreed to reimburse expenses to the extent necessary
to limit other expenses (excluding certain items discussed below) of Class A,
Class B, Class C, Class R and Institutional Class shares to 0.05% of average
daily net assets, respectively, through December 31, 2005. In determining the
advisor's obligation to reimburse expenses, the following expenses are not taken
into account, and could cause other expenses to exceed the limit stated above:
(i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend
expense on short sales; (v) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (vi) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses
of the underlying funds that are paid indirectly as a result of share ownership
of the underlying funds; and (viii) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year.
For the six months ended June 30, 2005, AIM waived fees of $131,911 and reimbursed expenses of $211,288.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $1,462.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $45,686.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $214,246 for Class A, Class B, Class C and Class R share classes and $5 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, FS-206
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 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 June 30, 2005, the Class A, Class B, Class C and Class R shares paid $188,363, $340,360, $218,046 and $13,399, 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 June 30, 2005, ADI advised the Fund that it retained $217,243 in front-end sales commissions from the sale of Class A shares and $5, $26,896, $5,540 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to ADI for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the six months ended June 30, 2005.
INVESTMENTS IN AFFILIATES:
CHANGE IN
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME
------------------------------------------------------------------------------------------------------------------------
AIM High Yield Fund-
Institutional Class $14,516,008 $ 16,558,330 $ (148,304) $ (387,299) $30,544,266 $ 797,731
------------------------------------------------------------------------------------------------------------------------
AIM International Core
Equity Fund-
Institutional Class 15,314,403 15,433,434 (152,285) (453,465) 30,167,190 --
------------------------------------------------------------------------------------------------------------------------
AIM International Growth
Fund- Institutional Class 11,715,748 11,489,260 (761,750) 91,383 22,687,432 --
------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Basic Value
Fund- Institutional Class 14,773,178 15,415,507 (150,182) 170,249 30,220,306 --
------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund-
Institutional Class 18,348,807 19,503,381 (185,361) 210,140 37,889,841 --
------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Basic Value
Fund- Institutional Class 7,516,013 7,659,506 (393,707) 446,746 15,279,346 --
------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Stock Fund-
Institutional Class 7,585,673 7,659,506 (336,405) 320,686 15,268,325 --
------------------------------------------------------------------------------------------------------------------------
AIM Multi-Sector Fund-
Institutional Class 7,521,090 7,659,506 (805,224) 625,665 15,116,788 --
------------------------------------------------------------------------------------------------------------------------
AIM Short Term Bond Fund-
Institutional Class 6,920,670 8,291,602 (72,613) (1,850) 15,137,627 181,169
------------------------------------------------------------------------------------------------------------------------
AIM Total Return Bond Fund-
Institutional Class 34,924,433 40,382,629 (366,607) 754,963 75,701,779 971,394
------------------------------------------------------------------------------------------------------------------------
AIM Trimark Small Companies
Fund- Institutional Class 7,789,461 7,659,506 (699,556) 409,384 15,303,216 --
========================================================================================================================
Total $146,925,484 $157,712,167 $(4,071,994) $2,186,602 $303,316,116 $1,950,294
________________________________________________________________________________________________________________________
========================================================================================================================
REALIZED
FUND GAIN (LOSS)
---------------------------
AIM High Yield Fund-
Institutional Class $ 5,531
---------------------------
AIM International Core
Equity Fund-
Institutional Class 25,103
---------------------------
AIM International Growth
Fund- Institutional Class 152,791
---------------------------
AIM Large Cap Basic Value
Fund- Institutional Class 11,554
---------------------------
AIM Large Cap Growth Fund-
Institutional Class 12,874
---------------------------
AIM Mid Cap Basic Value
Fund- Institutional Class 50,788
---------------------------
AIM Mid Cap Stock Fund-
Institutional Class 38,865
---------------------------
AIM Multi-Sector Fund-
Institutional Class 115,751
---------------------------
AIM Short Term Bond Fund-
Institutional Class (182)
---------------------------
AIM Total Return Bond Fund-
Institutional Class 6,361
---------------------------
AIM Trimark Small Companies
Fund- Institutional Class 144,421
===========================
Total $563,857
___________________________
===========================
|
NOTE 4--EXPENSE OFFSET ARRANGEMENT
The expense offset arrangement is comprised of transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions. For the six months ended June 30, 2005, the Fund received credits from this arrangement, which resulted in the reduction of the Fund's total expenses of $2,962.
FS-207
NOTE 5--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $2,278 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
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 June 30, 2005, the Fund did not 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 SSB, 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 at 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 reported at the Fund's fiscal year-end.
The Fund did not have a capital loss carryforward as of December 31, 2004.
NOTE 8--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the six months ended June 30, 2005 was $157,712,167 and $4,071,994, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $10,623,072 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (18,023) =============================================================================== Net unrealized appreciation of investment securities $10,605,049 _______________________________________________________________________________ =============================================================================== Cost of investments for tax purposes is $292,711,067. |
FS-208
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 certain 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
----------------------------------------------------------------------------------------------------------------------
APRIL 30, 2004
(DATE OPERATIONS
SIX MONTHS ENDED COMMENCED) TO
JUNE 30, 2005 DECEMBER 31, 2004
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------
Sold:
Class A 7,387,202 $ 80,009,592 6,787,469 $ 69,794,121
----------------------------------------------------------------------------------------------------------------------
Class B 4,622,787 49,877,667 4,360,168 44,695,661
----------------------------------------------------------------------------------------------------------------------
Class C 2,984,429 32,207,150 2,567,290 26,126,832
----------------------------------------------------------------------------------------------------------------------
Class R 836,985 9,079,386 212,270 2,203,895
----------------------------------------------------------------------------------------------------------------------
Institutional Class 2,060 22,473 10,001 100,010
======================================================================================================================
Issued as reinvestment of dividends:
Class A -- -- 49,479 534,374
----------------------------------------------------------------------------------------------------------------------
Class B -- -- 25,211 271,771
----------------------------------------------------------------------------------------------------------------------
Class C -- -- 14,140 152,429
----------------------------------------------------------------------------------------------------------------------
Class R -- -- 1,256 13,567
----------------------------------------------------------------------------------------------------------------------
Institutional Class -- -- 97 1,051
======================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 200,444 2,171,905 56,416 586,979
----------------------------------------------------------------------------------------------------------------------
Class B (201,303) (2,171,905) (56,538) (586,979)
======================================================================================================================
Reacquired:
Class A (786,364) (8,535,742) (336,672) (3,493,176)
----------------------------------------------------------------------------------------------------------------------
Class B (370,276) (3,996,446) (111,200) (1,159,466)
----------------------------------------------------------------------------------------------------------------------
Class C (312,700) (3,374,866) (66,234) (697,565)
----------------------------------------------------------------------------------------------------------------------
Class R (263,654) (2,883,595) (15,092) (160,693)
======================================================================================================================
14,099,610 $152,405,619 13,498,061 $138,382,811
______________________________________________________________________________________________________________________
======================================================================================================================
|
FS-209
NOTE 10--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.89 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07(a) 0.11(a)
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.06 0.87
===============================================================================================
Total from investment operations 0.13 0.98
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.09)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.09)
===============================================================================================
Net asset value, end of period $ 11.02 $ 10.89
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 1.19% 9.85%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $147,145 $71,431
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.40%(c) 0.40%(d)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 0.71%(c) 0.87%(d)
===============================================================================================
Estimated underlying fund expenses(e) 0.92% 0.92%
===============================================================================================
Ratio of net investment income to average net assets 1.33%(c) 1.56%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 2% 1%
_______________________________________________________________________________________________
===============================================================================================
|
(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 sale charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$108,527,734.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-210
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.87 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.06(a)
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.04 0.88
===============================================================================================
Total from investment operations 0.08 0.94
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.07)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.07)
===============================================================================================
Net asset value, end of period $ 10.95 $ 10.87
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 0.74% 9.44%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $90,583 $45,846
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 1.05%(c) 1.05%(d)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.36%(c) 1.52%(d)
===============================================================================================
Estimated underlying fund expenses(e) 0.92% 0.92%
===============================================================================================
Ratio of net investment income to average net assets 0.68%(c) 0.91%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 2% 1%
_______________________________________________________________________________________________
===============================================================================================
|
(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 sale charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$68,636,016.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-211
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.87 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.06(a)
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.04 0.88
===============================================================================================
Total from investment operations 0.08 0.94
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.07)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.07)
===============================================================================================
Net asset value, end of period $ 10.95 $ 10.87
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 0.74% 9.44%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $56,822 $27,339
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 1.05%(c) 1.05%(d)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 1.36%(c) 1.52%(d)
===============================================================================================
Estimated underlying fund expenses(e) 0.92% 0.92%
===============================================================================================
Ratio of net investment income to average net assets 0.68%(c) 0.91%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 2% 1%
_______________________________________________________________________________________________
===============================================================================================
|
(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 sale charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$43,970,684.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-212
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.89 $10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.06(a) 0.10(a)
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.05 0.88
===============================================================================================
Total from investment operations 0.11 0.98
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.09)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.09)
===============================================================================================
Net asset value, end of period $11.00 $10.89
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 1.01% 9.80%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $8,491 $2,161
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.55%(c) 0.55%(d)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 0.86%(c) 1.02%(d)
===============================================================================================
Estimated underlying fund expenses(e) 0.92% 0.92%
===============================================================================================
Ratio of net investment income to average net assets 1.18%(c) 1.41%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 2% 1%
_______________________________________________________________________________________________
===============================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$5,404,123.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
FS-213
NOTE 10--FINANCIAL HIGHLIGHTS--(CONTINUED)
INSTITUTIONAL CLASS
---------------------------------
APRIL 30, 2004
SIX MONTHS (DATE OPERATIONS
ENDED COMMENCED) TO
JUNE 30, DECEMBER 31,
2005 2004
-----------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.91 $10.00
-----------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.09(a) 0.13(a)
-----------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.05 0.88
===============================================================================================
Total from investment operations 0.14 1.01
===============================================================================================
Less distributions:
Dividends from net investment income -- (0.10)
-----------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.00)
===============================================================================================
Total distributions -- (0.10)
===============================================================================================
Net asset value, end of period $11.05 $10.91
_______________________________________________________________________________________________
===============================================================================================
Total return(b) 1.28% 10.16%
_______________________________________________________________________________________________
===============================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 134 $ 110
_______________________________________________________________________________________________
===============================================================================================
Ratio of expenses to average net assets:
With expense reimbursements 0.05%(c) 0.05%(d)
-----------------------------------------------------------------------------------------------
Without expense reimbursements 0.18%(c) 0.40%(d)
===============================================================================================
Estimated underlying fund expenses(e) 0.92% 0.92%
===============================================================================================
Ratio of net investment income to average net assets 1.68%(c) 1.91%(d)
_______________________________________________________________________________________________
===============================================================================================
Portfolio turnover rate(f) 2% 1%
_______________________________________________________________________________________________
===============================================================================================
|
(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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $113,554.
(d) Annualized.
(e) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the Fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(f) Not annualized for periods less than one year.
NOTE 11--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
FS-214
NOTE 11--LEGAL PROCEEDINGS--(CONTINUED)
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-215
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
-------------------------------------------------------------------
MUTUAL FUNDS-100.04%(a)
AIM Dynamics Fund-Institutional
Class-5.04%(b) 29,119 $ 494,730
-------------------------------------------------------------------
AIM High Yield Fund-Institutional
Class-10.05% 221,916 987,527
-------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-10.95%(b) 95,405 1,075,210
-------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-10.98%(b) 52,460 1,078,055
-------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-13.95%(b) 101,199 1,370,233
-------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-16.49%(b) 163,739 1,619,380
-------------------------------------------------------------------
AIM Mid Cap Basic Value Fund-Institutional
Class-5.03%(b) 36,635 494,576
-------------------------------------------------------------------
|
MARKET
SHARES VALUE
-------------------------------------------------------------------
AIM Multi-Sector Fund-Institutional
Class-7.48% 32,088 $ 734,483
-------------------------------------------------------------------
AIM Real Estate Fund-Institutional
Class-2.51% 9,114 247,082
-------------------------------------------------------------------
AIM Small Cap Equity Fund-Institutional
Class-7.58%(b) 58,365 744,157
-------------------------------------------------------------------
AIM Total Return Bond Fund-Institutional
Class-9.98% 92,676 980,515
===================================================================
Total Mutual Funds (Cost $9,715,955) 9,825,948
===================================================================
TOTAL INVESTMENTS-100.04% (Cost $9,715,955) 9,825,948
===================================================================
OTHER ASSETS LESS LIABILITIES-(0.04%) (4,226)
===================================================================
NET ASSETS-(100%) $9,821,722
___________________________________________________________________
===================================================================
|
Notes to Schedule of Investments:
(a) The mutual funds and the Fund are affiliated by having the same
investment advisor. See Note 3.
(b) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than
one year from the report date.
See accompanying notes which are an integral part of the financial statements.
FS-216
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments in affiliated underlying funds, at
market value (cost $9,715,955) $ 9,825,948
-----------------------------------------------------------
Receivables for:
Fund shares sold 259,111
-----------------------------------------------------------
Fund expenses absorbed 28,727
-----------------------------------------------------------
Other assets 3,485
===========================================================
Total assets 10,117,271
___________________________________________________________
===========================================================
LIABILITIES:
Payables for:
Investments purchased 259,111
-----------------------------------------------------------
Accrued distribution fees 3,637
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 108
-----------------------------------------------------------
Accrued operating expenses 32,693
===========================================================
Total liabilities 295,549
===========================================================
Net assets applicable to shares outstanding $ 9,821,722
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 9,707,078
-----------------------------------------------------------
Undistributed net investment income 3,329
-----------------------------------------------------------
Undistributed net realized gain from
investment securities 1,322
-----------------------------------------------------------
Unrealized appreciation of investment
securities 109,993
===========================================================
$ 9,821,722
___________________________________________________________
===========================================================
NET ASSETS:
Class A $ 4,907,804
___________________________________________________________
===========================================================
Class B $ 3,636,245
___________________________________________________________
===========================================================
Class C $ 1,143,726
___________________________________________________________
===========================================================
Class R $ 81,293
___________________________________________________________
===========================================================
Institutional Class $ 52,654
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 463,485
___________________________________________________________
===========================================================
Class B 343,759
___________________________________________________________
===========================================================
Class C 108,198
___________________________________________________________
===========================================================
Class R 7,683
___________________________________________________________
===========================================================
Institutional Class 4,971
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.59
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.59 divided by
94.50%) $ 11.21
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.58
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.57
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.58
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.59
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-217
STATEMENT OF OPERATIONS
For the period April 29, 2005 (Date operations commenced) through June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 8,834
======================================================================
EXPENSES:
Administrative services fees 8,630
----------------------------------------------------------------------
Custodian fees 1,200
----------------------------------------------------------------------
Distribution fees:
Class A 1,053
----------------------------------------------------------------------
Class B 2,882
----------------------------------------------------------------------
Class C 700
----------------------------------------------------------------------
Class R 56
----------------------------------------------------------------------
Transfer agent fees -- Class A, B, C and R 918
----------------------------------------------------------------------
Trustees' and officer's fees and benefits 2,671
----------------------------------------------------------------------
Reports to shareholders 11,000
----------------------------------------------------------------------
Professional services fees 18,962
----------------------------------------------------------------------
Other 3,654
======================================================================
Total expenses 51,726
======================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangement (46,221)
======================================================================
Net expenses 5,505
======================================================================
Net investment income 3,329
======================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 1,322
======================================================================
Change in net unrealized appreciation of affiliated
underlying funds 109,993
======================================================================
Net gain from affiliated underlying funds 111,315
======================================================================
Net increase in net assets resulting from operations $114,644
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-218
STATEMENT OF CHANGES IN NET ASSETS
For the period April 29, 2005 (Date operations commenced) through June 30, 2005
(Unaudited)
JUNE 30,
2005
--------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 3,329
--------------------------------------------------------------------------
Net realized gain from affiliated underlying funds 1,322
--------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 109,993
==========================================================================
Net increase in net assets resulting from operations 114,644
==========================================================================
Share transactions-net:
Class A 4,858,770
--------------------------------------------------------------------------
Class B 3,583,848
--------------------------------------------------------------------------
Class C 1,136,076
--------------------------------------------------------------------------
Class R 78,374
--------------------------------------------------------------------------
Institutional Class 50,010
==========================================================================
Net increase in net assets resulting from share
transactions 9,707,078
==========================================================================
Net increase in net assets 9,821,722
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income of $3,329) $9,821,722
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-219
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Moderate Growth Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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 April 29, 2005.
The Fund's investment objective is to provide long-term growth of capital consistent with a higher level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable 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 underlying funds' net
asset value. If the event is likely to have affected the closing price of
the security, the security will be valued at fair value in good faith using
procedures approved by the underlying funds' Board of Trustees. Adjustments
to closing prices to reflect fair value may also be based on a screening
process of an independent pricing service to indicate the degree of
certainty, based on historical data, that the closing price in the
principal market where a foreign
FS-220
security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds.
AIM has contractually agreed to reimburse expenses to the extent necessary
to limit other expenses (excluding certain items discussed below) of Class A,
Class B, Class C, Class R and Institutional Class shares to 0.12% of average
daily net assets, respectively, through December 31, 2005. In determining the
advisor's obligation to reimburse expenses, the following expenses are not taken
into account, and could cause other expenses to exceed the limit stated above:
(i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend
expense on short sales; (v) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (vi) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses
of the underlying funds that are paid indirectly as a result of share ownership
of the underlying funds; and (viii) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year.
For the period April 29, 2005 (date operations commenced) through June 30, 2005, AIM waived fees of $45,303 and reimbursed expenses of $918.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. For the period April 29, 2005 (date operations commenced) through June 30, 2005, AMVESCAP did not reimburse any expenses.
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. Pursuant to such agreement, for the period April 29, 2005 (date operations commenced) through June 30, 2005, AIM was paid $8,630.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the period April 29, 2005 (date operations commenced) through June 30, 2005, the Fund paid AISI $0 for Class A, Class B, Class C and Class R share classes and $0 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A shares. Of these amounts, up to 0.25% of the average daily net assets of the Class A, Class B, FS-221
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 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 April 29, 2005 (date operations commenced) through June 30, 2005, the Class A, Class B, Class C and Class R shares paid $1,053, $2,882, $700 and $56, 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 April 29, 2005 (date operations commenced) through June 30, 2005, ADI advised the Fund that it retained $6,629 in front-end sales commissions from the sale of Class A shares and $0, $191, $0 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to ADI for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the period April 29, 2005 (date operations commenced) through June 30, 2005.
UNREALIZED CHANGE IN
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 04/29/05 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
AIM Dynamics Fund-
Institutional Class $ -- $ 485,356 $ (3,190) $ 12,339 $ 494,730 $ -- $ 225
---------------------------------------------------------------------------------------------------------------------------------
AIM High Yield
Fund-Institutional Class -- 976,001 (963) 12,471 987,527 5,290 18
---------------------------------------------------------------------------------------------------------------------------------
AIM International Core
Equity Fund-
Institutional Class -- 1,077,294 (144) (1,943) 1,075,210 -- 3
---------------------------------------------------------------------------------------------------------------------------------
AIM International Growth
Fund- Institutional
Class -- 1,067,783 (2,773) 12,934 1,078,055 -- 111
---------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Basic Value
Fund- Institutional
Class -- 1,366,138 (184) 4,271 1,370,233 -- 8
---------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap Growth Fund-
Institutional Class -- 1,601,674 (222) 17,912 1,619,380 -- 16
---------------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap Basic Value
Fund- Institutional
Class -- 485,356 (2,523) 11,574 494,576 -- 169
---------------------------------------------------------------------------------------------------------------------------------
AIM Muti-Sector
Fund-Institutional Class -- 728,033 (8,042) 13,891 734,483 -- 601
---------------------------------------------------------------------------------------------------------------------------------
AIM Real Estate
Fund-Institutional Class -- 243,748 (1,911) 5,119 247,082 1,071 126
---------------------------------------------------------------------------------------------------------------------------------
AIM Small Cap Equity Fund-
Institutional Class -- 728,034 (596) 16,675 744,157 -- 44
---------------------------------------------------------------------------------------------------------------------------------
AIM Total Return Bond
Fund- Institutional
Class -- 975,894 (130) 4,750 980,515 2,473 1
=================================================================================================================================
Total $ -- $9,735,311 $(20,678) $109,993 $9,825,948 $8,834 $1,322
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
NOTE 4--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
FS-222
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the period April 29, 2005 (date operations commenced) through June 30, 2005, the Fund paid legal fees of $219 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 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 April 29, 2005 (date operations commenced) through June 30, 2005, the Fund did not 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 SSB, 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 at 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 reported at the Fund's fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period April 29, 2005 (date operations commenced) through June 30, 2005 was $9,735,311 and $20,678, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $111,936 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (1,943) ============================================================================== Net unrealized appreciation of investment securities $109,993 ______________________________________________________________________________ ============================================================================== Cost of investments is the same for tax and financial statement purposes. |
FS-223
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 certain 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(a)
-----------------------------------------------------------------------------------
APRIL 29, 2005
(DATE OPERATIONS
COMMENCED) TO
JUNE 30, 2005
---------------------
SHARES AMOUNT
-----------------------------------------------------------------------------------
Sold:
Class A 466,653 $4,892,359
-----------------------------------------------------------------------------------
Class B 348,268 3,630,749
-----------------------------------------------------------------------------------
Class C 108,358 1,137,743
-----------------------------------------------------------------------------------
Class R 7,683 78,374
-----------------------------------------------------------------------------------
Institutional Class 4,971 50,010
===================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 45 472
-----------------------------------------------------------------------------------
Class B (45) (472)
===================================================================================
Reacquired:
Class A (3,213) (34,061)
-----------------------------------------------------------------------------------
Class B (4,464) (46,429)
-----------------------------------------------------------------------------------
Class C (160) (1,667)
===================================================================================
928,096 $9,707,078
___________________________________________________________________________________
===================================================================================
|
(a) There is one entity that is a record owner of more than 5% of the outstanding shares of the Fund and it owns 5% of the outstanding shares of the Fund. AIM Distributors has an agreement with this entity to sell Fund shares. The Fund, AIM, and/or AIM affiliates may make payments to this entity, which is considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by this shareholder are also owned beneficially.
FS-224
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
CLASS A CLASS B CLASS C CLASS R INSTITUTIONAL CLASS
--------- --------- --------- --------- ----------------------
APRIL 29, 2005 (DATE OPERATIONS COMMENCED) TO JUNE 30, 2005
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.06 $10.06 $10.06 $10.06 $10.06
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.02 0.00 0.00 0.01 0.02
---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 0.51 0.52 0.51 0.51 0.51
=================================================================================================================================
Total from investment operations 0.53 0.52 0.51 0.52 0.53
=================================================================================================================================
Net asset value, end of period $10.59 $10.58 $10.57 $10.58 $10.59
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 5.27% 5.17% 5.07% 5.17% 5.27%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,908 $3,636 $1,144 $ 81 $ 53
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With expense reimbursements(c) 0.47% 1.12% 1.12% 0.62% 0.12%
---------------------------------------------------------------------------------------------------------------------------------
Without expense reimbursements(c) 7.28% 7.93% 7.93% 7.43% 6.79%
=================================================================================================================================
Estimated underlying fund expenses(d) 0.93% 0.93% 0.93% 0.93% 0.93%
=================================================================================================================================
Ratio of net investment income to average net
assets(c) 0.83% 0.18% 0.18% 0.68% 1.18%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 0% 0% 0% 0% 0%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$1,743,339, $1,669,411, $405,622, $64,823 and $51,804 for Class A, Class
B, Class C, Class R and the Institutional Class, respectively.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods less than one year.
FS-225
NOTE 10--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
FS-226
NOTE 10--LEGAL PROCEEDINGS--(CONTINUED)
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-227
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
------------------------------------------------------------------
MUTUAL FUNDS-100.04%(A)
AIM Capital Development Fund-Institutional
Class-2.52% 4,887 $ 92,171
------------------------------------------------------------------
AIM High Yield Fund-Institutional Class-5.03% 41,377 184,126
------------------------------------------------------------------
AIM Intermediate Government
Fund-Institutional Class-15.01% 61,741 548,874
------------------------------------------------------------------
AIM International Core Equity
Fund-Institutional Class-4.98% 16,172 182,260
------------------------------------------------------------------
AIM International Growth Fund-Institutional
Class-2.50%(b) 4,446 91,361
------------------------------------------------------------------
AIM Large Cap Basic Value Fund-Institutional
Class-11.23%(b) 30,324 410,591
------------------------------------------------------------------
AIM Large Cap Growth Fund-Institutional
Class-11.25%(b) 41,623 411,655
------------------------------------------------------------------
|
MARKET
SHARES VALUE
------------------------------------------------------------------
MUTUAL FUNDS-(CONTINUED)
AIM Mid Cap Basic Value Fund-Institutional
Class-5.04%(b) 13,657 $ 184,369
------------------------------------------------------------------
AIM Multi-Sector Fund-Institutional
Class-2.50% 3,988 91,295
------------------------------------------------------------------
AIM Short Term Bond Fund-Institutional
Class-14.99% 55,005 548,386
------------------------------------------------------------------
AIM Total Return Bond Fund-Institutional
Class-24.99% 86,404 914,151
==================================================================
TOTAL INVESTMENTS-100.04% (Cost $3,636,397) 3,659,239
==================================================================
OTHER ASSETS LESS LIABILITIES-(0.04%) (1,568)
==================================================================
NET ASSETS-100.00% $3,657,671
__________________________________________________________________
==================================================================
|
Notes to Schedule of Investments:
(a) The mutual funds and the Fund are affiliated by having the same investment
advisor. See Note 3.
(b) Non-income producing security. A security is determined to be non-income
producing if the security has not declared a distribution in more than one
year from the report date.
See accompanying notes which are an integral part of the financial statements.
FS-228
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments in affiliated underlying funds, at
market value (cost $3,636,397) $3,659,239
-----------------------------------------------------------
Receivables for:
Fund shares sold 225,354
-----------------------------------------------------------
Fund expenses absorbed 16,084
-----------------------------------------------------------
Other assets 876
===========================================================
Total assets 3,901,553
___________________________________________________________
===========================================================
LIABILITIES:
Payables for investments purchased 225,354
-----------------------------------------------------------
Accrued distribution fees 1,320
-----------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 108
-----------------------------------------------------------
Accrued operating expenses 17,100
===========================================================
Total liabilities 243,882
===========================================================
Net assets applicable to shares outstanding $3,657,671
___________________________________________________________
===========================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,628,367
-----------------------------------------------------------
Undistributed net investment income 4,905
-----------------------------------------------------------
Undistributed net realized gain from investment
securities 1,557
-----------------------------------------------------------
Unrealized appreciation of investment
securities 22,842
===========================================================
$3,657,671
___________________________________________________________
===========================================================
NET ASSETS:
Class A $2,020,675
___________________________________________________________
===========================================================
Class B $1,098,914
___________________________________________________________
===========================================================
Class C $ 419,802
___________________________________________________________
===========================================================
Class R $ 66,751
___________________________________________________________
===========================================================
Institutional Class $ 51,529
___________________________________________________________
===========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,
UNLIMITED NUMBER OF SHARES AUTHORIZED:
Class A 195,589
___________________________________________________________
===========================================================
Class B 106,540
___________________________________________________________
===========================================================
Class C 40,685
___________________________________________________________
===========================================================
Class R 6,464
___________________________________________________________
===========================================================
Institutional Class 4,986
___________________________________________________________
===========================================================
Class A:
Net asset value per share $ 10.33
-----------------------------------------------------------
Offering price per share:
(Net asset value of $10.33 divided by
94.50%) $ 10.93
___________________________________________________________
===========================================================
Class B:
Net asset value and offering price per share $ 10.31
___________________________________________________________
===========================================================
Class C:
Net asset value and offering price per share $ 10.32
___________________________________________________________
===========================================================
Class R:
Net asset value and offering price per share $ 10.33
___________________________________________________________
===========================================================
Institutional Class:
Net asset value and offering price per share $ 10.33
___________________________________________________________
===========================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-229
STATEMENT OF OPERATIONS
For the period April 29, 2005 (Date operations commenced) through June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends from affiliated underlying funds $ 7,036
======================================================================
EXPENSES:
Administrative services fees 8,630
----------------------------------------------------------------------
Custodian fees 1,100
----------------------------------------------------------------------
Distribution fees:
Class A 424
----------------------------------------------------------------------
Class B 1,093
----------------------------------------------------------------------
Class C 195
----------------------------------------------------------------------
Class R 45
----------------------------------------------------------------------
Transfer agent fees - Class A, B, C and R 295
----------------------------------------------------------------------
Trustees' and officer's fees and benefits 2,668
----------------------------------------------------------------------
Reports to shareholders 3,000
----------------------------------------------------------------------
Professional services fees 13,219
----------------------------------------------------------------------
Other 1,624
======================================================================
Total expenses 32,293
======================================================================
Less: Fees waived and expenses reimbursed (30,162)
======================================================================
Net expenses 2,131
======================================================================
Net investment income 4,905
======================================================================
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from affiliated underlying funds 1,557
======================================================================
Change in net unrealized appreciation of affiliated
underlying funds 22,842
======================================================================
Net gain from affiliated underlying funds 24,399
======================================================================
Net increase in net assets resulting from operations $ 29,304
______________________________________________________________________
======================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-230
STATEMENT OF CHANGES IN NET ASSETS
For the period April 29, 2005 (Date operations commenced) through June 30, 2005
(Unaudited)
2005
--------------------------------------------------------------------------
OPERATIONS:
Net investment income from affiliated underlying funds $ 4,905
--------------------------------------------------------------------------
Net realized gain from affiliated underlying funds 1,557
--------------------------------------------------------------------------
Change in net unrealized appreciation of affiliated
underlying funds 22,842
==========================================================================
Net increase in net assets resulting from operations 29,304
==========================================================================
Share transactions-net:
Class A 2,009,165
--------------------------------------------------------------------------
Class B 1,086,465
--------------------------------------------------------------------------
Class C 417,464
--------------------------------------------------------------------------
Class R 65,263
--------------------------------------------------------------------------
Institutional Class 50,010
==========================================================================
Net increase in net assets resulting from share
transactions 3,628,367
==========================================================================
Net increase in net assets 3,657,671
==========================================================================
NET ASSETS:
Beginning of period --
==========================================================================
End of period (including undistributed net investment
income of $4,905) $3,657,671
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-231
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Moderately Conservative Allocation Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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 April 29, 2005.
The Fund's investment objective is to provide total return consistent with a lower level of risk relative to the broad stock market. The Fund is a "fund of funds," in that it invests in the Institutional Class of other mutual funds ("underlying funds") advised by A I M Advisors, Inc. ("AIM"). AIM may change the Fund's asset class allocations, the underlying funds or the target weightings in the underlying funds without shareholder approval. The underlying funds may engage in a number of investment techniques and practices, which involve certain risks. Each underlying fund's accounting policies are outlined in the underlying fund's financial statements and are available upon request.
Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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 -- Investments in underlying funds are valued at the end of the day net asset value per share.
Securities in the underlying funds, 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 underlying funds' net asset value. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the underlying funds' Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an
FS-232
independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the underlying funds' officers following procedures approved by the underlying funds' 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.
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. Distributions from income from underlying funds, if any, are recorded as dividend income on ex-dividend date. Distributions from net realized capital gains from underlying funds, if any, are recorded as realized gains 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.
E. EXPENSES -- Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the underlying funds. The results of the underlying funds expenses are included in the realized and unrealized gain/loss on the investments in the underlying funds.
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 and other shareholder recordkeeping 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 AIM. Under the terms of the investment advisory agreement, the Fund does not pay an advisory fee. However, the Fund pays advisory fees to AIM indirectly as a shareholder of the underlying funds.
AIM has contractually agreed to reimburse expenses to the extent necessary
to limit other expenses (excluding certain items discussed below) of Class A,
Class B, Class C, Class R and Institutional Class shares to 0.14% of average
daily net assets, respectively, through December 31, 2005. In determining the
advisor's obligation to reimburse expenses, the following expenses are not taken
into account, and could cause other expenses to exceed the limit stated above:
(i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend
expense on short sales; (v) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (vi) expenses related to a merger or
reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses
of the underlying funds that are paid indirectly as a result of share ownership
of the underlying funds; and (viii) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, in
addition to the expense reimbursement arrangement with AMVESCAP PLC ("AMVESCAP")
described more fully below, the expense offset arrangements from which the Fund
may benefit 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. To
the extent that the annualized expense ratio does not exceed the expense
limitation, AIM will retain its ability to be reimbursed for such fee waivers or
reimbursements prior to the end of each fiscal year.
For the period April 29, 2005 (date operations commenced) through June 30, 2005, AIM waived fees of $29,867 and reimbursed expenses of $295.
At the request of the Trustees of the Trust, AMVESCAP agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. For the period April 29, 2005 (date operations commenced) through June 30, 2005, AMVESCAP did not reimburse any expenses.
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. Pursuant to such agreement, for the period April 29, 2005 (date operations commenced) through June 30, 2005, AIM was paid $8,630.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the period April 29, 2005 (date operations commenced) through June 30, 2005, the Fund paid AISI $295 for Class A, Class B, Class C and Class R share classes and $0 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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
FS-233
Fund's Class A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A 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 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 April 29, 2005 (date operations commenced) through June 30, 2005, the Class A, Class B, Class C and Class R shares paid $424, $1,093, $195 and $45, 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 April 29, 2005 (date operations commenced) through June 30, 2005, ADI advised the Fund that it retained $5,956 in front-end sales commissions from the sale of Class A shares and $0, $0, $0 and $0 from Class A, Class B, Class C and Class R shares, respectively, for CDSC imposed upon redemptions by shareholders.
The underlying funds pay no distribution fees and the Fund pays no sales loads or other similar compensation to ADI for acquiring underlying fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM, AISI and/or ADI.
NOTE 3--INVESTMENTS IN AFFILIATES
The Fund and the mutual funds below have the same investment advisor and therefore, are considered to be affiliated. The table below shows the transactions in and earnings from investments in affiliated mutual funds for the period April 29, 2005 (date operations commenced) through June 30, 2005.
INVESTMENTS IN AFFILIATES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 04/29/05 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
AIM Capital
Development
Fund-
Institutional
Class $ -- $ 92,442 $ (2,716) $ 2,285 $ 92,171 $ -- $ 160
----------------------------------------------------------------------------------------------------------------------------------
AIM High Yield
Fund-
Institutional
Class -- 185,934 (4,179) 2,366 184,126 1,049 5
----------------------------------------------------------------------------------------------------------------------------------
AIM
Intermediate
Government
Fund-
Institutional
Class -- 559,656 (10,405) (365) 548,874 2,128 (12)
----------------------------------------------------------------------------------------------------------------------------------
AIM
International
Core Equity
Fund-
Institutional
Class -- 185,840 (3,490) (152) 182,260 -- 62
----------------------------------------------------------------------------------------------------------------------------------
AIM
International
Growth Fund-
Institutional
Class -- 92,442 (2,336) 1,192 91,361 -- 63
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Basic Value
Fund-
Institutional
Class -- 416,665 (7,928) 1,554 410,591 -- 300
----------------------------------------------------------------------------------------------------------------------------------
AIM Large Cap
Growth Fund-
Institutional
Class -- 415,989 (9,693) 4,869 411,655 -- 490
----------------------------------------------------------------------------------------------------------------------------------
AIM Mid Cap
Basic Value-
Institutional
Class -- 184,884 (5,307) 4,518 184,369 -- 274
----------------------------------------------------------------------------------------------------------------------------------
AIM
Multi-Sector
Fund-
Institutional
Class -- 92,442 (3,136) 1,808 91,295 -- 181
----------------------------------------------------------------------------------------------------------------------------------
AIM Short Term
Bond Fund-
Institutional
Class -- 558,345 (10,409) 450 548,386 1,406 --
----------------------------------------------------------------------------------------------------------------------------------
AIM Total
Return Bond
Fund-
Institutional
Class -- 927,176 (17,376) 4,317 914,151 2,453 34
==================================================================================================================================
Total $ -- $3,711,815 $(76,975) $22,842 $3,659,239 $7,036 $1,557
__________________________________________________________________________________________________________________________________
==================================================================================================================================
|
FS-234
NOTE 4--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the period April 29, 2005 (date operations commenced) through June 30, 2005, the Fund paid legal fees of $219 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 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 April 29, 2005 (date operations commenced) through June 30, 2005, the Fund did not 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 SSB, 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 at 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 reported at the Fund's fiscal year-end.
NOTE 7--INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the period April 29, 2005 (date operations commenced) through June 30, 2005 was $3,711,815 and $76,975, respectively.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------- Aggregate unrealized appreciation of investment securities $23,358 ------------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (516) =============================================================================== Net unrealized appreciation of investment securities $22,842 _______________________________________________________________________________ =============================================================================== Investments have the same cost for tax and financial statement purposes. |
FS-235
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 certain 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(a)
------------------------------------------------------------------------------------
APRIL 29, 2005
(DATE OPERATIONS
COMMENCED) TO
JUNE 30,
2005
----------------------
SHARES AMOUNT
------------------------------------------------------------------------------------
Sold:
Class A 195,721 $2,010,513
------------------------------------------------------------------------------------
Class B 106,540 1,086,465
------------------------------------------------------------------------------------
Class C 40,685 417,464
------------------------------------------------------------------------------------
Class R 6,464 65,263
------------------------------------------------------------------------------------
Institutional Class 4,986 50,010
====================================================================================
Reacquired:
Class A (132) (1,348)
====================================================================================
354,264 $3,628,367
____________________________________________________________________________________
====================================================================================
|
(a) There are three entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 18% of the outstanding shares of the Fund. AIM Distributors may have an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-236
NOTE 9--FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund outstanding throughout the period indicated.
INSTITUTIONAL
CLASS A CLASS B CLASS C CLASS R CLASS
---------------------------------------------------------------------
APRIL 29, 2005 (DATE OPERATIONS COMMENCED) TO JUNE 30, 2005
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.03 $10.03 $10.03 $10.03 $10.03
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04(a) 0.03(a) 0.03(a) 0.04(a) 0.04(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.26 0.25 0.26 0.26 0.26
=================================================================================================================================
Total from investment operations 0.30 0.28 0.29 0.30 0.30
=================================================================================================================================
Net asset value, end of period $10.33 $10.31 $10.32 $10.33 $10.33
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 2.99% 2.79% 2.89% 2.99% 2.99%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,021 $1,099 $ 420 $ 67 $ 52
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements(c) 0.49% 1.14% 1.14% 0.64% 0.14%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements(c) 11.76% 12.41% 12.41% 11.91% 11.30%
=================================================================================================================================
Estimated underlying fund expenses(d) 0.76% 0.76% 0.76% 0.76% 0.76%
=================================================================================================================================
Ratio of net investment income to average net assets(c) 2.14% 1.49% 1.49% 1.99% 2.49%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 4% 4% 4% 4% 4%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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, if any, and is
not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of $701,532,
$633,609, $113,146, $51,723 and $50,999 for Class A, Class B, Class C,
Class R and Institutional Class, respectively.
(d) In addition to the fees and expenses which the Fund bears directly, the
Fund indirectly bears a pro rata share of the fees and expenses of the
underlying funds in which the fund invests. Because the underlying funds
have varied expenses and fee levels and the Fund may own different
proportions at different times, the amount of fees and expenses incurred
indirectly by the Fund will vary.
(e) Not annualized for periods less than one year.
FS-237
NOTE 10--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages,
FS-238
NOTE 10--LEGAL PROCEEDINGS--(CONTINUED)
restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-239
FINANCIALS
SCHEDULE OF INVESTMENTS
June 30, 2005
(Unaudited)
MARKET
SHARES VALUE
---------------------------------------------------------------------------
COMMON STOCKS & OTHER EQUITY INTERESTS-98.12%
AEROSPACE & DEFENSE-1.74%
Mercury Computer Systems, Inc.(a) 484,800 $ 13,268,976
---------------------------------------------------------------------------
United Industrial Corp. 426,200 15,232,388
===========================================================================
28,501,364
===========================================================================
AIR FREIGHT & LOGISTICS-1.50%
Forward Air Corp. 446,400 12,619,728
---------------------------------------------------------------------------
UTi Worldwide, Inc. (United Kingdom)(b) 170,000 11,835,400
===========================================================================
24,455,128
===========================================================================
APPAREL RETAIL-4.24%
Aeropostale, Inc.(a)(b) 501,100 16,836,960
---------------------------------------------------------------------------
bebe stores, inc.(b) 393,262 10,409,645
---------------------------------------------------------------------------
Children's Place Retail Stores, Inc.
(The)(a)(b) 298,400 13,926,328
---------------------------------------------------------------------------
Jos. A. Bank Clothiers, Inc.(a) 480,174 20,791,534
---------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a)(b) 317,000 7,287,830
===========================================================================
69,252,297
===========================================================================
APPAREL, ACCESSORIES & LUXURY GOODS-0.85%
Warnaco Group, Inc. (The)(a)(b) 599,700 13,943,025
===========================================================================
APPLICATION SOFTWARE-3.50%
ANSYS, Inc.(a) 123,300 4,378,383
---------------------------------------------------------------------------
Catapult Communications Corp.(a) 344,700 5,880,582
---------------------------------------------------------------------------
Epicor Software Corp.(a) 887,700 11,717,640
---------------------------------------------------------------------------
Macromedia, Inc.(a) 587,200 22,442,784
---------------------------------------------------------------------------
MicroStrategy Inc.-Class A(a)(b) 241,800 12,825,072
===========================================================================
57,244,461
===========================================================================
ASSET MANAGEMENT & CUSTODY BANKS-0.74%
Affiliated Managers Group, Inc.(a)(b) 176,500 12,060,245
===========================================================================
BIOTECHNOLOGY-2.85%
Affymetrix, Inc.(a)(b) 242,400 13,072,632
---------------------------------------------------------------------------
Amylin Pharmaceuticals, Inc.(a)(b) 414,700 8,679,671
---------------------------------------------------------------------------
Myriad Genetics, Inc.(a)(b) 353,000 5,524,450
---------------------------------------------------------------------------
Protein Design Labs, Inc.(a) 462,800 9,353,188
---------------------------------------------------------------------------
United Therapeutics Corp.(a)(b) 205,500 9,905,100
===========================================================================
46,535,041
===========================================================================
BROADCASTING & CABLE TV-0.59%
Radio One, Inc.-Class A(a) 273,800 3,485,474
---------------------------------------------------------------------------
Radio One, Inc.-Class D(a)(b) 480,100 6,130,877
===========================================================================
9,616,351
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
CASINOS & GAMING-0.56%
Penn National Gaming, Inc.(a) 250,000 $ 9,125,000
===========================================================================
COMMUNICATIONS EQUIPMENT-3.04%
F5 Networks, Inc.(a)(b) 181,406 8,568,712
---------------------------------------------------------------------------
NETGEAR, Inc.(a) 658,300 12,244,380
---------------------------------------------------------------------------
Plantronics, Inc.(b) 241,500 8,780,940
---------------------------------------------------------------------------
Polycom, Inc.(a)(b) 660,300 9,845,073
---------------------------------------------------------------------------
SafeNet, Inc.(a)(b) 302,000 10,286,120
===========================================================================
49,725,225
===========================================================================
COMPUTER & ELECTRONICS RETAIL-0.78%
GameStop Corp.-Class A(a)(b) 391,900 12,819,049
===========================================================================
COMPUTER HARDWARE-0.69%
Avid Technology, Inc.(a)(b) 212,200 11,306,016
===========================================================================
CONSTRUCTION & FARM MACHINERY & HEAVY
TRUCKS-0.59%
Toro Co. (The) 249,000 9,613,890
===========================================================================
CONSTRUCTION MATERIALS-1.07%
Eagle Materials Inc.(b) 189,700 17,564,323
===========================================================================
DATA PROCESSING & OUTSOURCED SERVICES-1.87%
Euronet Worldwide, Inc.(a) 531,400 15,447,798
---------------------------------------------------------------------------
Global Payments Inc.(b) 222,300 15,071,940
===========================================================================
30,519,738
===========================================================================
DIVERSIFIED CHEMICALS-0.87%
FMC Corp.(a)(b) 252,400 14,169,736
===========================================================================
DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES-2.75%
Corporate Executive Board Co. (The) 208,000 16,292,640
---------------------------------------------------------------------------
CoStar Group Inc.(a)(b) 379,000 16,524,400
---------------------------------------------------------------------------
CRA International Inc.(a)(b) 224,400 12,083,940
===========================================================================
44,900,980
===========================================================================
ELECTRICAL COMPONENTS & EQUIPMENT-0.68%
Thomas & Betts Corp.(a) 392,100 11,072,904
===========================================================================
|
FS-240
MARKET
SHARES VALUE
---------------------------------------------------------------------------
ELECTRONIC EQUIPMENT MANUFACTURERS-1.85%
Daktronics, Inc.(b) 31,600 $ 632,316
---------------------------------------------------------------------------
FARO Technologies, Inc.(a) 500,500 13,643,630
---------------------------------------------------------------------------
FLIR Systems, Inc.(a)(b) 536,600 16,012,144
===========================================================================
30,288,090
===========================================================================
ELECTRONIC MANUFACTURING SERVICES-0.86%
Trimble Navigation Ltd.(a)(b) 361,000 14,068,170
===========================================================================
ENVIRONMENTAL & FACILITIES SERVICES-0.90%
Stericycle, Inc.(a)(b) 291,600 14,673,312
===========================================================================
FERTILIZERS & AGRICULTURAL CHEMICALS-0.90%
Scotts Miracle-Gro Co. (The)-Class A(a)(b) 207,100 14,747,591
===========================================================================
FOOD DISTRIBUTORS-0.94%
United Natural Foods, Inc.(a)(b) 505,300 15,345,961
===========================================================================
FOOTWEAR-0.64%
Wolverine World Wide, Inc. 435,600 10,458,756
===========================================================================
HEALTH CARE EQUIPMENT-6.49%
American Medical Systems Holdings, Inc.(a) 724,600 14,962,990
---------------------------------------------------------------------------
Integra LifeSciences Holdings(a) 400,300 11,688,760
---------------------------------------------------------------------------
Intuitive Surgical, Inc.(a)(b) 257,900 12,028,456
---------------------------------------------------------------------------
Mentor Corp.(b) 437,200 18,135,056
---------------------------------------------------------------------------
NuVasive, Inc.(a) 687,500 11,426,250
---------------------------------------------------------------------------
ResMed Inc.(a)(b) 191,100 12,610,689
---------------------------------------------------------------------------
Varian Inc.(a)(b) 305,200 11,533,508
---------------------------------------------------------------------------
Wright Medical Group, Inc.(a) 511,500 13,657,050
===========================================================================
106,042,759
===========================================================================
HEALTH CARE FACILITIES-2.75%
AmSurg Corp.(a)(b) 355,450 9,842,410
---------------------------------------------------------------------------
LifePoint Hospitals, Inc.(a) 398,500 20,132,220
---------------------------------------------------------------------------
VCA Antech, Inc.(a)(b) 617,600 14,976,800
===========================================================================
44,951,430
===========================================================================
HEALTH CARE SERVICES-2.75%
Advisory Board Co. (The)(a) 200,000 9,748,000
---------------------------------------------------------------------------
Cerner Corp.(a)(b) 305,600 20,771,632
---------------------------------------------------------------------------
Pediatrix Medical Group, Inc.(a) 194,600 14,310,884
---------------------------------------------------------------------------
Per-Se Technologies, Inc.(a) 8,186 172,070
===========================================================================
45,002,586
===========================================================================
HEALTH CARE SUPPLIES-2.07%
Gen-Probe Inc.(a)(b) 337,000 12,209,510
---------------------------------------------------------------------------
Immucor, Inc.(a) 380,244 11,008,064
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
HEALTH CARE SUPPLIES-(CONTINUED)
Millipore Corp.(a)(b) 186,900 $ 10,602,837
===========================================================================
33,820,411
===========================================================================
HOME FURNISHINGS-0.91%
Tempur-Pedic International Inc.(a) 671,600 14,896,088
===========================================================================
HOMEBUILDING-0.90%
Beazer Homes USA, Inc.(b) 257,600 14,721,840
===========================================================================
HOTELS, RESORTS & CRUISE LINES-1.58%
Choice Hotels International, Inc. 238,400 15,662,880
---------------------------------------------------------------------------
Kerzner International Ltd. (Bahamas)(a) 179,400 10,216,830
===========================================================================
25,879,710
===========================================================================
HOUSEHOLD PRODUCTS-0.74%
Church & Dwight Co., Inc.(b) 335,900 12,159,580
===========================================================================
HYPERMARKETS & SUPER CENTERS-0.82%
BJ's Wholesale Club, Inc.(a)(b) 415,000 13,483,350
===========================================================================
INDUSTRIAL MACHINERY-3.04%
Actuant Corp.-Class A(a) 219,100 10,503,654
---------------------------------------------------------------------------
Graco Inc. 267,600 9,117,132
---------------------------------------------------------------------------
IDEX Corp. 263,500 10,173,735
---------------------------------------------------------------------------
JLG Industries, Inc.(b) 721,200 19,818,576
===========================================================================
49,613,097
===========================================================================
INTEGRATED TELECOMMUNICATION SERVICES-0.17%
NeuStar, Inc.-Class A(a) 109,200 2,795,520
===========================================================================
INTERNET SOFTWARE & SERVICES-1.61%
Blue Coat Systems, Inc.(a) 165,800 4,954,104
---------------------------------------------------------------------------
ValueClick, Inc.(a) 1,026,900 12,661,677
---------------------------------------------------------------------------
Websense, Inc.(a)(b) 182,300 8,759,515
===========================================================================
26,375,296
===========================================================================
INVESTMENT BANKING & BROKERAGE-0.56%
Jefferies Group, Inc.(b) 241,500 9,150,435
===========================================================================
INVESTMENT COMPANIES-EXCHANGE TRADED
FUNDS-0.51%
iShares Nasdaq Biotechnology Index Fund(b) 123,900 8,412,810
===========================================================================
IT CONSULTING & OTHER SERVICES-1.33%
MPS Group, Inc.(a) 974,900 9,183,558
---------------------------------------------------------------------------
Sapient Corp.(a) 1,574,000 12,481,820
===========================================================================
21,665,378
===========================================================================
|
FS-241
MARKET
SHARES VALUE
---------------------------------------------------------------------------
LEISURE PRODUCTS-2.56%
Marvel Enterprises, Inc.(a) 681,500 $ 13,439,180
---------------------------------------------------------------------------
Nautilus, Inc.(b) 615,500 17,541,750
---------------------------------------------------------------------------
RC2 Corp.(a) 288,300 10,831,431
===========================================================================
41,812,361
===========================================================================
MANAGED HEALTH CARE-0.55%
Centene Corp.(a)(b) 268,400 9,012,872
===========================================================================
MARINE-0.48%
Kirby Corp.(a) 172,200 7,766,220
===========================================================================
MOVIES & ENTERTAINMENT-1.51%
Imax Corp. (Canada)(a)(b) 1,017,100 10,109,974
---------------------------------------------------------------------------
Lions Gate Entertainment Corp. (Canada)(a)(b) 1,414,900 14,516,874
===========================================================================
24,626,848
===========================================================================
MULTI-LINE INSURANCE-0.65%
HCC Insurance Holdings, Inc. 280,400 10,618,748
===========================================================================
OIL & GAS DRILLING-0.96%
Unit Corp.(a)(b) 355,100 15,627,951
===========================================================================
OIL & GAS EQUIPMENT & SERVICES-2.59%
Cal Dive International, Inc.(a)(b) 340,800 17,847,696
---------------------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 432,700 11,605,014
---------------------------------------------------------------------------
FMC Technologies, Inc.(a)(b) 402,500 12,867,925
===========================================================================
42,320,635
===========================================================================
OIL & GAS EXPLORATION & PRODUCTION-1.84%
Encore Acquisition Co.(a) 354,200 14,522,200
---------------------------------------------------------------------------
Range Resources Corp. 578,800 15,569,720
===========================================================================
30,091,920
===========================================================================
PHARMACEUTICALS-1.27%
First Horizon Pharmaceutical Corp.(a) 563,800 10,734,752
---------------------------------------------------------------------------
MGI Pharma, Inc.(a)(b) 463,700 10,090,112
===========================================================================
20,824,864
===========================================================================
PROPERTY & CASUALTY INSURANCE-0.63%
ProAssurance Corp.(a)(b) 245,800 10,264,608
===========================================================================
REAL ESTATE-1.20%
BioMed Realty Trust, Inc. 221,500 5,282,775
---------------------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 214,700 14,251,786
===========================================================================
19,534,561
===========================================================================
REGIONAL BANKS-4.00%
Amegy Bancorp., Inc.(b) 564,800 12,640,224
---------------------------------------------------------------------------
East West Bancorp, Inc.(b) 380,100 12,767,559
---------------------------------------------------------------------------
PrivateBancorp, Inc.(b) 244,000 8,632,720
---------------------------------------------------------------------------
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
REGIONAL BANKS-(CONTINUED)
SVB Financial Group(a)(b) 329,100 $ 15,763,890
---------------------------------------------------------------------------
Texas Capital Bancshares, Inc.(a) 363,500 7,175,490
---------------------------------------------------------------------------
Texas Regional Bancshares, Inc.-Class A 276,200 8,418,576
===========================================================================
65,398,459
===========================================================================
RESTAURANTS-4.32%
Jack in the Box Inc.(a)(b) 387,900 14,709,168
---------------------------------------------------------------------------
P.F. Chang's China Bistro, Inc.(a)(b) 294,900 17,393,202
---------------------------------------------------------------------------
Panera Bread Co.-Class A(a)(b) 133,400 8,282,139
---------------------------------------------------------------------------
RARE Hospitality International, Inc.(a)(b) 470,400 14,333,088
---------------------------------------------------------------------------
Sonic Corp.(a) 519,800 15,869,494
===========================================================================
70,587,091
===========================================================================
SEMICONDUCTOR EQUIPMENT-2.42%
FormFactor Inc.(a) 511,000 13,500,620
---------------------------------------------------------------------------
Tessera Technologies Inc.(a)(b) 405,000 13,531,050
---------------------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a)(b) 339,300 12,554,100
===========================================================================
39,585,770
===========================================================================
SEMICONDUCTORS-2.32%
ARM Holdings PLC-ADR (United Kingdom)(b) 2,247,845 13,801,768
---------------------------------------------------------------------------
Microsemi Corp.(a) 871,752 16,388,938
---------------------------------------------------------------------------
Semtech Corp.(a)(b) 114,600 1,908,090
---------------------------------------------------------------------------
Sigmatel Inc.(a)(b) 334,900 5,746,884
===========================================================================
37,845,680
===========================================================================
SPECIALTY STORES-2.17%
Guitar Center, Inc.(a)(b) 210,600 12,292,722
---------------------------------------------------------------------------
Regis Corp. 303,600 11,864,688
---------------------------------------------------------------------------
Steiner Leisure Ltd. (Bahamas)(a)(b) 303,200 11,239,624
===========================================================================
35,397,034
===========================================================================
STEEL-0.73%
Carpenter Technology Corp. 231,700 12,002,060
===========================================================================
SYSTEMS SOFTWARE-1.52%
Internet Security Systems, Inc.(a)(b) 647,050 13,128,645
---------------------------------------------------------------------------
Macrovision Corp.(a)(b) 522,500 11,777,150
===========================================================================
24,905,795
===========================================================================
TRADING COMPANIES & DISTRIBUTORS-1.65%
Hughes Supply, Inc.(b) 411,900 11,574,390
---------------------------------------------------------------------------
MSC Industrial Direct Co., Inc.-Class A 454,800 15,349,500
===========================================================================
26,923,890
===========================================================================
TRUCKING-2.46%
Heartland Express, Inc.(b) 458,400 8,906,712
---------------------------------------------------------------------------
Knight Transportation, Inc.(b) 377,200 9,177,276
---------------------------------------------------------------------------
|
FS-242
MARKET
SHARES VALUE
---------------------------------------------------------------------------
TRUCKING-(CONTINUED)
Old Dominion Freight Line, Inc.(a) 302,800 $ 8,124,124
---------------------------------------------------------------------------
Swift Transportation Co., Inc.(a) 604,300 14,074,147
===========================================================================
40,282,259
===========================================================================
WIRELESS TELECOMMUNICATION SERVICES-1.06%
Alamosa Holdings, Inc.(a)(b) 1,244,000 17,291,600
===========================================================================
Total Common Stocks & Other Equity
Interests (Cost $1,233,962,928) 1,603,698,169
===========================================================================
MONEY MARKET FUNDS-0.20%
Liquid Assets Portfolio-Institutional
Class(c) 1,604,407 1,604,407
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(c) 1,604,407 1,604,407
===========================================================================
Total Money Market Funds (Cost
$3,208,814) 3,208,814
===========================================================================
TOTAL INVESTMENTS-98.32% (excluding
investments purchased with cash collateral
from securities loaned) (Cost
$1,237,171,742) 1,606,906,983
===========================================================================
|
MARKET
SHARES VALUE
---------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED
MONEY MARKET FUNDS-31.80%
Liquid Assets Portfolio-Institutional
Class(c)(d) 259,866,765 $ 259,866,765
---------------------------------------------------------------------------
STIC Prime Portfolio-Institutional
Class(c)(d) 259,866,765 259,866,765
===========================================================================
Total Money Market Funds (purchased with
cash collateral from securities loaned)
(Cost $519,733,530) 519,733,530
===========================================================================
TOTAL INVESTMENTS-130.12% (Cost
$1,756,905,272) 2,126,640,513
===========================================================================
OTHER ASSETS LESS LIABILITIES-(30.12%) (492,264,937)
===========================================================================
NET ASSETS-100.00% $1,634,375,576
___________________________________________________________________________
===========================================================================
|
Investment Abbreviations:
ADR - American Depositary Receipt |
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) All or a portion of this security has been pledged as collateral for
securities lending transactions at June 30, 2005.
(c) The money market fund and the Fund are affiliated by having the same
investment advisor. See Note 3.
(d) 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 8.
See accompanying notes which are an integral part of the financial statements.
FS-243
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2005
(Unaudited)
ASSETS:
Investments, at market value (cost
$1,233,962,928)* $1,603,698,169
------------------------------------------------------------
Investments in affiliated money market funds
(cost $522,942,344) 522,942,344
============================================================
Total investments (cost $1,756,905,272) 2,126,640,513
============================================================
Receivables for:
Investments sold 58,281,850
------------------------------------------------------------
Investments sold to affiliates 1,051,240
------------------------------------------------------------
Fund shares sold 1,735,931
------------------------------------------------------------
Dividends 351,873
------------------------------------------------------------
Investment for trustee deferred compensation
and retirement plans 43,762
------------------------------------------------------------
Other assets 65,029
============================================================
Total assets 2,188,170,198
============================================================
LIABILITIES:
Payables for:
Investments purchased 9,141,152
------------------------------------------------------------
Fund shares reacquired 23,351,789
------------------------------------------------------------
Trustee deferred compensation and
retirement plans 100,842
------------------------------------------------------------
Collateral upon return of securities
loaned 519,733,530
------------------------------------------------------------
Accrued distribution fees 592,167
------------------------------------------------------------
Accrued trustees' and officer's fees and
benefits 293
------------------------------------------------------------
Accrued transfer agent fees 727,152
------------------------------------------------------------
Accrued operating expenses 147,697
============================================================
Total liabilities 553,794,622
============================================================
Net assets applicable to shares outstanding $1,634,375,576
____________________________________________________________
============================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,257,987,670
------------------------------------------------------------
Undistributed net investment income (loss) (8,988,017)
------------------------------------------------------------
Undistributed net realized gain from
investment securities 15,640,682
------------------------------------------------------------
Unrealized appreciation of investment
securities 369,735,241
============================================================
$1,634,375,576
____________________________________________________________
============================================================
NET ASSETS:
Class A $1,317,363,266
____________________________________________________________
============================================================
Class B $ 128,149,741
____________________________________________________________
============================================================
Class C $ 33,702,255
____________________________________________________________
============================================================
Class R $ 19,118,672
____________________________________________________________
============================================================
Institutional Class $ 136,041,642
____________________________________________________________
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE, UNLIMITED NUMBER OF SHARES
AUTHORIZED:
Class A 47,105,407
____________________________________________________________
============================================================
Class B 4,932,949
____________________________________________________________
============================================================
Class C 1,297,954
____________________________________________________________
============================================================
Class R 689,075
____________________________________________________________
============================================================
Institutional Class 4,785,421
____________________________________________________________
============================================================
Class A:
Net asset value per share $ 27.97
------------------------------------------------------------
Offering price per share:
(Net asset value of $27.97 divided by
94.50%) $ 29.60
____________________________________________________________
============================================================
Class B:
Net asset value and offering price per
share $ 25.98
____________________________________________________________
============================================================
Class C:
Net asset value and offering price per
share $ 25.97
____________________________________________________________
============================================================
Class R:
Net asset value and offering price per
share $ 27.75
____________________________________________________________
============================================================
Institutional Class:
Net asset value and offering price per
share $ 28.43
____________________________________________________________
============================================================
|
* At June 30, 2005, securities with an aggregate market value of $501,481,933 were on loan to brokers.
See accompanying notes which are an integral part of the financial statements.
FS-244
STATEMENT OF OPERATIONS
For the six months ended June 30, 2005
(Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $1,857) $ 1,937,877
--------------------------------------------------------------------------
Dividends from affiliated money market funds (includes
securities lending income of $1,385,046 after compensation
to counterparties of $3,982,930) 1,777,293
==========================================================================
Total investment income 3,715,170
==========================================================================
EXPENSES:
Advisory fees 5,767,732
--------------------------------------------------------------------------
Administrative services fees 202,135
--------------------------------------------------------------------------
Custodian fees 79,754
--------------------------------------------------------------------------
Distribution fees:
Class A 2,377,475
--------------------------------------------------------------------------
Class B 666,420
--------------------------------------------------------------------------
Class C 178,097
--------------------------------------------------------------------------
Class R 46,687
--------------------------------------------------------------------------
Transfer agent fees -- Class A, B, C & R 3,725,041
--------------------------------------------------------------------------
Transfer agent fees -- Institutional Class 54,019
--------------------------------------------------------------------------
Trustees' and officer's fees and benefits 30,189
--------------------------------------------------------------------------
Other 225,302
==========================================================================
Total expenses 13,352,851
==========================================================================
Less: Fees waived, expenses reimbursed and expense offset
arrangements (716,306)
==========================================================================
Net expenses 12,636,545
==========================================================================
Net investment income (loss) (8,921,375)
==========================================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES:
Net realized gain from investment securities (includes gains
from securities sold to affiliates of $455,846) 129,654,259
--------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (94,671,539)
==========================================================================
Net gain from investment securities 34,982,720
==========================================================================
Net increase in net assets resulting from operations $ 26,061,345
__________________________________________________________________________
==========================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-245
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 2005 and the year ended December 31, 2004
(Unaudited)
JUNE 30, DECEMBER 31,
2005 2004
----------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (8,921,375) $ (22,312,120)
----------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures
contracts and option contracts 129,654,259 143,771,500
----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, futures contracts and option
contracts (94,671,539) (19,550,976)
==============================================================================================
Net increase in net assets resulting from operations 26,061,345 101,908,404
==============================================================================================
Share transactions-net:
Class A (196,069,989) (192,987,130)
----------------------------------------------------------------------------------------------
Class B (22,552,985) (41,206,105)
----------------------------------------------------------------------------------------------
Class C (7,505,965) (11,365,203)
----------------------------------------------------------------------------------------------
Class R (672,011) 9,247,057
----------------------------------------------------------------------------------------------
Institutional Class 20,817,109 (3,899,271)
==============================================================================================
Net increase (decrease) in net assets resulting from
share transactions (205,983,841) (240,210,652)
==============================================================================================
Net increase (decrease) in net assets (179,922,496) (138,302,248)
==============================================================================================
NET ASSETS:
Beginning of period 1,814,298,072 1,952,600,320
==============================================================================================
End of period (including undistributed net investment
income (loss) of $(8,988,017) and $(66,642),
respectively) $1,634,375,576 $1,814,298,072
______________________________________________________________________________________________
==============================================================================================
|
See accompanying notes which are an integral part of the financial statements.
FS-246
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund (the "Fund") is a separate series of AIM Growth Series (the "Trust"). The Trust is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of nine 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. Effective as of the close of business on March 18, 2002, the Fund's shares were offered on a limited basis to certain investors.
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, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is 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 including estimates and assumptions related to taxation. 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, which may be considered fair valued, 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.
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. 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.
Debt obligations (including convertible bonds) are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes 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 specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations having 60 days or less to maturity and commercial paper are valued at amortized cost which approximates market value.
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.
Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable 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 the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current market value will be priced at the indication of fair value from the 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 and domestic and foreign index futures.
FS-247
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved 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.
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 transaction 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. 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 and other shareholder recordkeeping 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.
F. COVERED CALL OPTIONS -- The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised.
G. 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 received or made 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.
H. COLLATERAL -- To the extent the Fund has pledged or segregated a security as collateral and that security is subsequently sold, it is the Fund's practice to substitute such collateral no later than the next business day. This practice does not apply to securities pledged as collateral for securities lending transactions.
FS-248
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 based on the annual rate of the Fund's average daily net assets as follows:
AVERAGE NET ASSETS RATE ---------------------------------------------------------------------- First $500 million 0.725% ---------------------------------------------------------------------- Next $500 million 0.70% ---------------------------------------------------------------------- Next $500 million 0.675% ---------------------------------------------------------------------- Over $1.5 billion 0.65% ______________________________________________________________________ ====================================================================== |
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). AIM is also voluntarily waiving a portion of the advisory fee payable by the Fund equal to the difference between the income earned from investing in the affiliated money market fund and the hypothetical income earned from investing in an appropriate comparative benchmark. Voluntary fee waivers or reimbursements may be modified or discontinued at any time upon consultation with the Board of Trustees without further notice to investors.
For the six months ended June 30, 2005, AIM waived fees of $4,328.
At the request of the Trustees of the Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the six months ended June 30, 2005, AMVESCAP reimbursed expenses of the Fund in the amount of $9,011.
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. Pursuant to such agreement, for the six months ended June 30, 2005, AIM was paid $202,135.
The Fund, pursuant to a transfer agency and service agreement, has agreed to pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency and shareholder services to the Fund and reimburse AISI for certain expenses incurred by AISI in the course of providing such services. AISI may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended June 30, 2005, the Fund paid AISI $3,725,041 for Class A, Class B, Class C and Class R share classes and $54,019 for Institutional Class shares.
The Trust has entered into master distribution agreements with A I M Distributors, Inc. ("ADI") 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 ADI 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. Effective July 1, 2005, the Trustees approved a permanent reduction in the annual rate payable by the Fund to ADI to 0.25% of the average daily net assets of Class A shares. Of these amounts, 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 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. Through June 30, 2005, during the periods the Fund was offered on a limited basis, ADI had agreed to waive 0.10% of Rule 12b-1 plan fees on Class A shares. Pursuant to the Plans, for the six months ended June 30, 2005, the Class A, Class B, Class C and Class R shares paid $1,698,196, $666,420, $178,097 and $46,687, respectively, after ADI waived Plan fees of $679,279 for Class A shares.
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 six months ended June 30, 2005, ADI advised the Fund that it retained $13,652 in front-end sales commissions from the sale of Class A shares and $771, $15,905, $1,250 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 ADI.
FS-249
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. The tables below show the transactions in and earnings from investments in affiliated money market funds for the six months ended June 30, 2005.
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $12,837,129 $140,008,077 $(151,240,799) $ -- $1,604,407 $195,051 $ --
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 12,837,129 140,008,077 (151,240,799) -- 1,604,407 197,196 --
=================================================================================================================================
Subtotal $25,674,258 $280,016,154 $(302,481,598) $ -- $3,208,814 $392,247 $ --
=================================================================================================================================
|
INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:
UNREALIZED
MARKET VALUE PURCHASES PROCEEDS APPRECIATION MARKET VALUE DIVIDEND REALIZED
FUND 12/31/04 AT COST FROM SALES (DEPRECIATION) 06/30/05 INCOME* GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------------------------
Liquid Assets
Portfolio-
Institutional
Class $205,833,934 $273,994,216 $(219,961,385) $ -- $259,866,765 $ 687,059 $ --
-----------------------------------------------------------------------------------------------------------------------------------
STIC Prime
Portfolio-
Institutional
Class 205,833,935 273,994,215 (219,961,385) -- 259,866,765 697,987 --
===================================================================================================================================
Subtotal $411,667,869 $547,988,431 $(439,922,770) $ -- $519,733,530 $1,385,046 $ --
===================================================================================================================================
Total $437,342,127 $828,004,585 $(742,404,368) $ -- $522,942,344 $1,777,293 $ --
___________________________________________________________________________________________________________________________________
===================================================================================================================================
|
*Net of compensation to counterparties.
NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS
The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, during the six months ended June 30, 2005, the Fund engaged in securities purchases of $339,783 and sales of $4,108,852, which resulted in net realized gains of $455,846.
NOTE 5--EXPENSE OFFSET ARRANGEMENTS
The expense offset arrangements are comprised of (i) transfer agency credits which result from balances in Demand Deposit Accounts (DDA) used by the transfer agent for clearing shareholder transactions and (ii) custodian credits which result from periodic overnight cash balances at the custodian. For the six months ended June 30, 2005, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $23,688.
NOTE 6--TRUSTEES' AND OFFICER'S FEES AND BENEFITS
"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to each Trustee of the Fund who is not an "interested person" of the AIM Funds. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, 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 who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.
In addition to the above, "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to the Senior Officer of the AIM Funds.
During the six months ended June 30, 2005, the Fund paid legal fees of $5,241 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.
FS-250
NOTE 7--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. 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. A loan will be secured by collateral if the Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total assets. 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 June 30, 2005, 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 SSB, 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 at an amount equal to the Federal Funds rate plus 100 basis points.
NOTE 8--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 June 30, 2005, securities with an aggregate value of $501,481,933 were on loan to brokers. The loans were secured by cash collateral of $519,733,530 received by the Fund and subsequently invested in affiliated money market funds. For the six months ended June 30, 2005, the Fund received dividends on cash collateral of $1,385,046 for securities lending transactions, which are net of compensation to counterparties.
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 reported 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 utilize capital loss carryforward in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The Fund had a capital loss carryforward as of December 31, 2004 which expires as follows:
CAPITAL LOSS
EXPIRATION CARRYFORWARD*
-----------------------------------------------------------------------------
December 31, 2010 $ 73,388,721
-----------------------------------------------------------------------------
December 31, 2011 40,026,936
=============================================================================
Total capital loss carryforward $113,415,657
_____________________________________________________________________________
=============================================================================
|
* Capital loss carryforward as of the date listed above is reduced for limitations, if any, to the extent required by the Internal Revenue Code.
FS-251
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 June 30, 2005 was $388,062,802 and $600,913,503, respectively. For interim reporting periods, the cost of investments for tax purposes includes reversals of certain tax items, such as, wash sales that have occurred since the prior fiscal year-end.
UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS ------------------------------------------------------------------------------ Aggregate unrealized appreciation of investment securities $407,963,169 ------------------------------------------------------------------------------ Aggregate unrealized (depreciation) of investment securities (38,476,785) ============================================================================== Net unrealized appreciation of investment securities $369,486,384 ______________________________________________________________________________ ============================================================================== Cost of investments for tax purposes is $1,757,154,129. |
NOTE 11--SHARE INFORMATION
The Fund currently consists of 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 and Institutional Class shares are sold at net asset value. Under certain 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(A)
--------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31, 2004
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------------------------
Sold:
Class A 8,122,317 $ 218,690,104 24,314,386 $ 628,943,607
--------------------------------------------------------------------------------------------------------------------------
Class B 83,357 2,079,941 287,423 6,942,558
--------------------------------------------------------------------------------------------------------------------------
Class C 82,184 2,051,604 266,409 6,403,144
--------------------------------------------------------------------------------------------------------------------------
Class R 167,591 4,476,864 553,344 14,127,974
--------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,294,205 35,866,657 1,807,401 46,669,980
==========================================================================================================================
Automatic conversion of Class B shares to Class A shares:
Class A 106,664 2,864,146 267,852 6,898,694
--------------------------------------------------------------------------------------------------------------------------
Class B (114,608) (2,864,146) (286,124) (6,898,694)
==========================================================================================================================
Reacquired:
Class A (15,447,449) (417,624,239) (32,593,314) (828,829,431)
--------------------------------------------------------------------------------------------------------------------------
Class B (870,050) (21,768,780) (1,739,802) (41,249,969)
--------------------------------------------------------------------------------------------------------------------------
Class C (382,354) (9,557,569) (740,566) (17,768,347)
--------------------------------------------------------------------------------------------------------------------------
Class R (193,500) (5,148,875) (190,940) (4,880,917)
--------------------------------------------------------------------------------------------------------------------------
Institutional Class (552,695) (15,049,548) (1,936,260) (50,569,251)
==========================================================================================================================
(7,704,338) $(205,983,841) (9,990,191) $(240,210,652)
__________________________________________________________________________________________________________________________
==========================================================================================================================
|
(a) There are two entities that are each record owners of more than 5% of the outstanding shares of the Fund and in the aggregate they own 19% of the outstanding shares of the Fund. AIM Distributors has an agreement with these entities to sell Fund shares. The Fund, AIM and/or AIM affiliates may make payments to these entities, which are considered to be related to the Fund, for providing services to the Fund, AIM and/or AIM affiliates including but not limited to services such as, securities brokerage, distribution, third party record keeping and account servicing. The Trust has no knowledge as to whether all or any portion of the shares owned of record by these shareholders are also owned beneficially.
FS-252
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 DECEMBER 31,
JUNE 30, ---------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.46 $ 25.71 $ 18.47 $ 25.67 $ 29.81 $ 31.87
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.14)(a) (0.32) (0.21)(a) (0.19)(a) (0.18)(a) (0.13)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.65 2.07 7.45 (7.01) (3.93) (0.12)
=================================================================================================================================
Total from investment operations 0.51 1.75 7.24 (7.20) (4.11) (0.25)
=================================================================================================================================
Less distributions:
Distributions from net realized gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 27.97 $ 27.46 $ 25.71 $ 18.47 $ 25.67 $ 29.81
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.86% 6.81% 39.20% (28.05)% (13.79)% (0.74)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,317,363 $1,491,940 $1,602,724 $790,700 $679,104 $566,458
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense
reimbursements 1.49%(c) 1.40% 1.27% 1.35% 1.31% 1.13%
---------------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense
reimbursements 1.59%(c) 1.51% 1.37% 1.43% 1.39% 1.23%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.04)%(c) (1.12)% (0.98)% (0.91)% (0.70)% (0.40)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(d) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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 net assets of $1,369,815,685.
(d) Not annualized for periods less than one year.
FS-253
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.61 $ 24.15 $ 17.49 $ 24.48 $ 28.64 $ 30.92
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.40)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.59 1.98 7.01 (6.66) (3.78) (0.07)
=================================================================================================================================
Total from investment operations 0.37 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.98 $ 25.61 $ 24.15 $ 17.49 $ 24.48 $ 28.64
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.44% 6.05% 38.08% (28.55)% (14.42)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $128,150 $149,400 $182,700 $152,577 $212,958 $231,293
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.24%(c) 2.15%(d) 2.02% 2.08% 2.03%(d) 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.79)%(c) (1.87)% (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$134,388,574.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
for 2004 and 2001 was 2.16% and 2.04%, respectively.
(e) Not annualized for periods less than one year.
FS-254
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS C
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------------------------
2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 25.60 $ 24.14 $ 17.48 $ 24.47 $ 28.63 $ 30.91
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.22)(a) (0.52) (0.35)(a) (0.33)(a) (0.35)(a) (0.39)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both
realized and unrealized) 0.59 1.98 7.01 (6.66) (3.78) (0.08)
=================================================================================================================================
Total from investment operations 0.37 1.46 6.66 (6.99) (4.13) (0.47)
=================================================================================================================================
Less distributions from net realized gains -- -- -- -- (0.03) (1.81)
=================================================================================================================================
Net asset value, end of period $ 25.97 $ 25.60 $ 24.14 $ 17.48 $ 24.47 $ 28.63
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 1.45% 6.05% 38.10% (28.57)% (14.43)% (1.48)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $33,702 $40,904 $50,031 $41,693 $46,833 $41,738
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 2.24%(c) 2.15%(d) 2.02% 2.08% 2.03%(d) 1.88%
=================================================================================================================================
Ratio of net investment income (loss) to
average net assets (1.79)%(c) (1.87)% (1.73)% (1.64)% (1.43)% (1.15)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e) 24% 69% 32% 22% 37% 62%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
|
(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
$35,914,542.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
for 2004 and 2001 was 2.16% and 2.04%, respectively.
(e) Not annualized for periods less than one year.
FS-255
NOTE 12--FINANCIAL HIGHLIGHTS--(CONTINUED)
CLASS R
---------------------------------------------------------
JUNE 3, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, -------------------- DECEMBER 31,
2005 2004 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.28 $ 25.61 $18.44 $ 22.64
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.27) (0.28)(a) (0.13)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.64 1.94 7.45 (4.07)
=======================================================================================================================
Total from investment operations 0.47 1.67 7.17 (4.20)
=======================================================================================================================
Net asset value, end of period $ 27.75 $ 27.28 $25.61 $ 18.44
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 1.72% 6.52% 38.88% (18.55)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $19,119 $19,506 $9,029 $ 1,301
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets 1.74%(c) 1.65%(d) 1.52% 1.61%(e)
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (1.29)%(c) (1.37)% (1.23)% (1.17)%(e)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(f) 24% 69% 32% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$18,829,781.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 1.66%.
(e) Annualized.
(f) Not annualized for periods less than one year.
INSTITUTIONAL CLASS
-------------------------------------------------------------
MARCH 15, 2002
SIX MONTHS YEAR ENDED (DATE SALES
ENDED DECEMBER 31, COMMENCED) TO
JUNE 30, ----------------------- DECEMBER 31,
2005 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 27.83 $ 25.91 $ 18.53 $ 24.61
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05)(a) (0.16) (0.12)(a) (0.07)(a)
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.65 2.08 7.50 (6.01)
===========================================================================================================================
Total from investment operations 0.60 1.92 7.38 (6.08)
===========================================================================================================================
Net asset value, end of period $ 28.43 $ 27.83 $ 25.91 $ 18.53
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 2.15% 7.41% 39.83% (24.71)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $136,042 $112,547 $108,116 $ 2,866
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 0.85%(c) 0.85%(d) 0.80% 0.89%(e)
===========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.40)%(c) (0.57)% (0.51)% (0.45)%(e)
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate(f) 24% 69% 32% 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. Not annualized for periods less than one year.
(c) Ratios are annualized and based on average daily net assets of
$115,060,776.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements
was 0.86%.
(e) Annualized.
(f) Not annualized for periods less than one year.
FS-256
NOTE 13--LEGAL PROCEEDINGS
Terms used in the Legal Proceedings Note are defined terms solely for the purpose of this note.
SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING
On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment advisor to certain AIM Funds), AIM and A I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached final settlements with certain regulators, including the Securities and Exchange Commission ("SEC"), the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM Funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) is being created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI agreed to create a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM Funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM Funds and acceptable to the staff of the SEC. As the methodology is unknown at the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the distribution of these two fair funds may have on the Fund or whether such distribution will have an impact on the Fund's financial statements in the future.
At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, has agreed to reimburse expenses incurred by the AIM Funds related to market timing matters.
REGULATORY INQUIRIES AND PENDING LITIGATION
IFG, AIM, ADI and/or related entities and individuals have received inquiries from numerous regulators 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, contractual plans, issues related to Section 529 college savings plans and procedures for locating lost securityholders. IFG, AIM and ADI are providing full cooperation with respect to these inquiries. As described more fully below, the AIM Funds, IFG, AIM, ADI and/or related entities and individuals are defendants in numerous civil lawsuits related to one or more of these issues. Regulatory actions and/or additional civil lawsuits related to these or other issues may be filed against the AIM Funds, IFG, AIM and/or related entities and individuals in the future.
On April 12, 2005, the Attorney General of the State of West Virginia ("WVAG") filed a civil lawsuit against AIM, IFG and ADI, as well as numerous unrelated mutual fund complexes and financial institutions. None of the AIM Funds has been named as a defendant in this lawsuit. The WVAG complaint, filed in the Circuit Court of Marshall County, West Virginia [Civil Action No. 05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair competition and/or unfair or deceptive trade practices by failing to disclose in the prospectuses for the AIM Funds, including those formerly advised by IFG, that they had entered into certain arrangements permitting market timing of such Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code sec. 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection Act). The WVAG complaint is seeking, among other things, injunctive relief, civil monetary penalties and a writ of quo warranto against the defendants. If AIM is unsuccessful in its defense of the WVAG lawsuit, 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"). Such results could 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 the Fund. The Fund has been informed by AIM that, if these results occur, AIM will seek exemptive relief from the SEC to permit it to continue to serve as the Fund's investment advisor. There is no assurance that such exemptive relief will be granted. On July 7, 2005, the Supreme Court of West Virginia ruled in the context of a separate lawsuit that the WVAG does not have authority pursuant to W. Va. Code Section 46A-6-104 of the West Virginia Consumer Credit and Protection Act to bring an action based upon conduct that is ancillary to the purchase or sale of securities. AIM intends to seek dismissal of the WVAG's lawsuit against it, IFG and ADI in light of this ruling.
Civil lawsuits, including purported class action and shareholder derivative suits, have been filed against certain of the AIM Funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging:
- that the defendants permitted improper market timing and related activity in the AIM Funds;
- that certain AIM Funds inadequately employed fair value pricing;
- that the defendants charged excessive advisory and/or distribution fees and failed to pass on to shareholders the perceived savings generated by economies of scale and that the defendants adopted unlawful distribution plans;
- that the defendants breached their fiduciary duties by charging distribution fees while AIM Funds and/or specific share classes were closed generally to new investors and/or while other share classes of the same AIM Fund were not charged the same distribution fees;
- that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions; and
- that the defendants breached their fiduciary duties by failing to ensure that the AIM Funds participated in class action settlements in which they were eligible to participate.
FS-257
NOTE 13--LEGAL PROCEEDINGS--(CONTINUED)
These lawsuits allege as theories of recovery, depending on the lawsuit, violations of various provisions of the Federal and state securities laws and ERISA, negligence, breach of fiduciary duty and/or breach of contract. These lawsuits seek remedies that include, depending on the lawsuit, damages, restitution, injunctive relief, imposition of a constructive trust, removal of certain directors and/or employees, various corrective measures under ERISA, rescission of certain AIM Funds' advisory agreements and/or distribution plans and recovery of all fees paid, an accounting of all fund-related fees, commissions and soft dollar payments, restitution of all commissions and fees paid, and prospective relief in the form of reduced fees.
At the present time, management of AIM and the Fund are unable to estimate the impact, if any, that the outcome of the Regulatory Inquiries and Pending Litigation described above may have on AIM, ADI or the Fund.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
As a result of the matters discussed above, investors in the AIM Funds might react by redeeming their investments. This might require the AIM Funds to sell investments to provide for sufficient liquidity and could also have an adverse effect on the investment performance of the AIM Funds.
FS-258
PART C
OTHER INFORMATION
Item 23. Exhibits
a - (a) Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(17)
- (b) Amendment No. 1 to the Amended and Restated Agreement and Declaration of Trust of Registrant, dated September 14, 2005.(18)
b - Amended and Restated Bylaws of Registrant, adopted effective
September 14, 2005.(17)
c - Articles II, VI, VII, VIII and IX of Registrant's Amended and
Restated Agreement and Declaration of Trust, as amended, and
Articles IV, V and VI of the Amended and Restated Bylaws,
define rights of holders of shares.(9)
d - (a) Master Investment Advisory Agreement, dated June 5, 2000,
between the Registrant and A I M Advisors, Inc.(6)
- (b) Amendment No. 1, dated September 11, 2000, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(6)
- (c) Amendment No. 2, dated September 1, 2001, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(8)
- (d) Amendment No. 3, dated July 1, 2002, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(10)
- (e) Amendment No. 4, dated September 23, 2002, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(10)
- (f) Amendment No. 5, dated November 4, 2003, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(13)
- (h) Amendment No. 7, dated April 30, 2004, to the Master
Investment Advisory Agreement, dated June 5, 2000, between the
Registrant and A I M Advisors, Inc.(13)
- (i) Amendment No. 8, dated April 29, 2005, to the Master
Investment Advisory Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.(16)
- (j) Amendment No. 9, dated October 31, 2005, to the Master
Investment Advisory Agreement, dated June 5, 2000, between
Registrant and A I M Advisors, Inc.(18)
|
e (1) - (a) Amended and Restated Master Distribution Agreement, dated
as of August 18, 2003, between Registrant (all classes of
shares except Class B shares) and A I M Distributors, Inc.(12)
- (b) Amendment No. 1 to the Amended and Restated Master
Distribution Agreement, dated October 29, 2003, between
Registrant (all classes of shares except Class B shares) and
A I M Distributors, Inc.(12)
|
- (c) Amendment No. 2 to the Amended and Restated Master Distribution Agreement, dated November 4, 2003, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(12)
- (d) Amendment No. 3 to the Amended and Restated Master Distribution Agreement, dated November 20, 2003, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4 to the Amended and Restated Master Distribution Agreement, dated November 24, 2003, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(12)
- (f) Amendment No. 5 to the Amended and Restated Master Distribution Agreement, dated as of November 25, 2003, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(12)
- (g) Amendment No. 6 to the Amended and Restated Master Distribution Agreement, dated as of January 6, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc. (13)
- (h) Amendment No. 7 to the Amended and Restated Master Distribution Agreement dated as of March 31, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(13)
- (i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement dated as of April 30, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(13)
- (j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement dated as of September 14, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(14)
- (k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement dated as of September 15, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(14)
- (l) Amendment No. 11 to the Amended and Restated Master Distribution Agreement dated as of October 15, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(14)
- (m) Amendment No. 12 to the Amended and Restated Master Distribution Agreement dated as of November 30, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(14)
- (n) Amendment No. 13 to the Amended and Restated Master Distribution Agreement dated as of December 30, 2004, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(14)
- (o) Amendment No. 14 to the Amended and Restated Master Distribution Agreement dated as of February 25, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(15)
- (p) Amendment No. 15 to the Amended and Restated Master Distribution Agreement dated as of March 15, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(15)
- (q) Amendment No. 16 to the Amended and Restated Master Distribution Agreement dated as of April 29, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(16)
- (r) Amendment No. 17 to the Amended and Restated Master Distribution Agreement dated July 13, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(17)
- (s) Amendment No. 18 to the Amended and Restated Master Distribution Agreement dated July 18, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(17)
- (t) Amendment No. 19 to the Amended and Restated Master Distribution Agreement dated October 22, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(17)
- (u) Amendment No. 20 to the Amended and Restated Master Distribution Agreement dated October 25, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(17)
- (v) Amendment No. 21 to the Amended and Restated Master Distribution Agreement dated October 31, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(18)
- (w) Form of Amendment No. 22 to the Amended and Restated Master Distribution Agreement dated as of December 14, 2005, between Registrant (all classes of shares except Class B shares) and A I M Distributors, Inc.(18)
(2) - (a) Amended and Restated Master Distribution Agreement, dated
as of August 18, 2003, between Registrant (Class B shares) and
A I M Distributors, Inc.(12)
- (b) Amendment No. 1 to the Amended and Restated Master
Distribution Agreement, dated as of October 1, 2003, between
Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (c) Amendment No. 2 to the Amended and Restated Master
Distribution Agreement, dated as of October 29, 2003, between
Registrant (Class B shares) and A I M Distributors, Inc.(12)
|
- (d) Amendment No. 3 to the Amended and Restated Master Distribution Agreement, dated as of November 3, 2003, between Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4 to the Amended and Restated Master Distribution Agreement, dated as of November 4, 2003, between Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (f) Amendment No. 5 to the Amended and Restated Master Distribution Agreement, dated as of November 20, 2003, between Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (g) Amendment No. 6 to the Amended and Restated Master Distribution Agreement, dated as of November 24, 2003, between Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (h) Amendment No. 7 to the Amended and Restated Master Distribution Agreement, dated as of November 25, 2003, between Registrant (Class B shares) and A I M Distributors, Inc.(12)
- (i) Amendment No. 8 to the Amended and Restated Master Distribution Agreement, dated as of March 31, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.(13)
- (j) Amendment No. 9 to the Amended and Restated Master Distribution Agreement, dated as of April 30, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.(13)
- (k) Amendment No. 10 to the Amended and Restated Master Distribution Agreement, dated as of September 15, 2004, between Registrant (Class B shares) and A I M Distributors, Inc. (14)
- (l) Amendment No. 11 to the Amended and Restated Master Distribution Agreement, dated as of October 15, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.(14)
- (m) Amendment No. 12 to the Amended and Restated Master Distribution Agreement, dated as of December 30, 2004, between Registrant (Class B shares) and A I M Distributors, Inc.(14)
- (n) Amendment No. 13 to the Amended and restated Master Distribution Agreement, dated as of March 15, 2005, between Registrant (Class B shares) and A I M Distributors, Inc.(15)
- (o) Amendment No. 14 to the Amended and Restated Master Distribution Agreement, dated as of April 29, 2005, between Registrant (Class B shares) and A I M Distributors, Inc.(16)
- (p) Amendment No. 15, to the Amended and Restated Master Distribution Agreement, dated July 18, 2005, between Registrant (Class B shares) and A I M Distributors, Inc.(16)
- (q) Amendment No. 16 to the Amended and Restated Master Distribution Agreement, dated October 31, 2005, between Registrant (Class B shares) and A I M Distributors, Inc.(18)
(3) - Form of Selected Dealer Agreement for Investment Companies
Managed by A I M Advisors, Inc.(6)
(4) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks.(3)
f (1) - AIM Funds Retirement Plan for Eligible Directors/Trustees, as
restated October 1, 2001.(7)
(2) - Form of AIM Funds Director Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors, as amended September
26, 2002.(10)
g (1) - (a) Master Custodian Contract, dated May 1, 2000, between
State Street Bank and Trust Company and Registrant.(6)
- (b) Amendment No. 1 dated May 1, 2000, to Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(6)
- (c) Amendment, dated June 29, 2001, to Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(7)
- (d) Amendment, dated April 2, 2002, to the Master Custodian
Contract, dated May 1, 2000, between State Street Bank and
Trust Company and Registrant.(8)
- (e) Amendment, dated September 8, 2004, to the Master
Custodian Contract, dated May 1, 2000, between State Street
Bank and Trust Company and Registrant.(14)
(2) - (a) Subcustodian Agreement, dated September 9, 1994, among the
Registrant, Texas Commerce Bank National Association, State
Street Bank and Trust Company and A I M Fund Services, Inc.(7)
- (b) Amendment No 1, dated October 2, 1998, to Subcustodian
Agreement among the Registrant, Texas Commerce Bank National
Association now known as Chase Bank of Texas, N.A., State
Street Bank and Trust Company and A I M Fund Services, Inc.(7)
- (c) Amendment No. 2, dated March 15, 2002, to Subcustodian
Agreement among the Registrant, JP Morgan Chase Bank (formerly
Chase Bank of Texas, N.A., and formerly Texas Commerce Bank
National Association), State Street Bank and Trust Company and
A I M Fund Services, Inc.(10)
(3) - Subcustodian Agreement, dated January 20, 1993, between State
Street Bank and Trust Company and The Bank of New York.(7)
(4) - Foreign Assets Delegation Agreement, dated May 31, 2002,
between Registrant and A I M Advisors, Inc.(7)
h (1) - Transfer Agency and Service Agreement between Registrant and
AIM Investment Services, Inc., dated July 1, 2004. (14)
(2) - (a) Amended and Restated Master Administrative Services
Agreement, dated July 1, 2004, between Registrant and A I M
Advisors, Inc.(14)
|
- (b) Amendment No. 1, dated December 2, 2004, to the Master Administrative Services Agreement, dated July 1, 2004, between Registrant and A I M Advisors, Inc.(14)
- (c) Amendment No. 2, dated April 29, 2005, to the Master Administrative Services Agreement, dated July 1, 2004, between Registrant and A I M Advisors, Inc.(16)
- (d) Amendment No. 3 to the Master Administrative Services Agreement, dated October 31, 2005, between Registrant and A I M Advisors, Inc.(18)
(3) - (a) Memorandum of Agreement, dated October 29, 2003, between
Registrant and A I M Advisors, Inc. regarding securities
lending with respect to all Funds.(14)
- (b) Memorandum of Agreement, dated May 5, 2005, between
Registrant and A I M Advisors, Inc. with respect to AIM Basic
Value Fund, AIM Global Equity Fund, AIM Mid Cap Core Equity
Fund and AIM Small Cap Growth Fund.(16)
- (c) Memorandum of Agreement, dated October 31, 2005, between
Registrant and A I M Advisors, Inc. with respect to AIM
Aggressive Allocation Fund, AIM Conservative Allocation Fund,
AIM Global Equity Fund, AIM Income Allocation Fund, AIM
International Allocation Fund, AIM Moderate Allocation Fund,
AIM Moderate Growth Allocation Fund and AIM Moderately
Conservative Allocation Fund.(18)
(4) - (a) Interfund Loan Agreement, dated September 18, 2001,
between Registrant and A I M Advisors, Inc.(7)
- (b) Second Amended and Restated Interfund Loan Agreement,
dated April 30, 2004, between Registrant and A I M Advisors,
Inc. (14)
(5) - Agreement and Plan of Reorganization, dated July 30, 2003,
between Registrant and AIM Series Trust, a Delaware statutory
trust, previously filed with the Proxy Statement of AIM Series
Trust on August 1, 2003, is hereby incorporated by reference.
(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 - Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP.(18)
j - Consent of PricewaterhouseCoopers LLP.(18)
k - Omitted Financial Statements -- None.
l - (a) Initial Capital Agreement dated April 29, 2004, for AIM
Aggressive Allocation Fund, AIM Conservative Allocation Fund
and AIM Moderate Allocation Fund.(13)
- (b) Initial Capital Agreement dated April 28, 2005, for AIM
Moderate Growth Allocation Fund and AIM Moderately
Conservative Allocation Fund.(16)
- (c) Initial Capital Agreement dated October 28, 2005, for AIM
Income Allocation Fund and AIM International Allocation
Fund.(18)
|
m (1) - (a) Amended and Restated Master Distribution Plan dated as of
August 18, 2003, between Registrant (Class A Shares) and A I M
Distributors, Inc.(12)
- (b) Amendment No. 1, dated October 29, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(12)
- (c) Amendment No. 2, dated November 4, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 20, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4, dated November 24, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(12)
- (f) Amendment No. 5, dated November 25, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(13)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(13)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(14)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(14)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(14)
- (l) Amendment No. 11, dated January 1, 2005, to the Amended
and Restated Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(14)
- (m) Amendment No. 12, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(15)
- (n) Amendment No. 13, dated April 29, 2005, to the Amended and
Restated Distribution Plan between Registrant (Class A Shares)
and A I M Distributors, Inc.(16)
|
- (o) Amendment No. 14, dated July 1, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(16)
- (p) Amendment No. 15, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class A
Shares) and A I M Distributors, Inc.(16)
- (q) Amendment No. 16, dated October 31, 2005, to the Amended
and Restated Master Distribution Plan between Registrant
(Class A Shares) and A I M Distributors, Inc.(17)
(2) - (a) Amended and Restated Master Distribution Plan dated as of
August 18, 2003, between Registrant (Class B Shares) and A I M
Distributors, Inc.(12)
- (b) Amendment No. 1, dated October 29, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(12)
- (c) Amendment No. 2, dated November 4, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 20, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4, dated November 24, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(12)
- (f) Amendment No. 5, dated November 25, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class B Shares) and A I M Distributors, Inc.(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class B
Shares) and A I M Distributors, Inc.(13)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and
Restated Master Distribution Plan (Class B Shares) and A I M
Distributors, Inc.(13)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan (Class B Shares) and
A I M Distributors, Inc.(14)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan (Class B Shares) and
A I M Distributors, Inc.(14)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Master Distribution Plan (Class B Shares) and
A I M Distributors, Inc.(14)
- (l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) and A I M
Distributors, Inc. (15)
|
- (m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) and A I M
Distributors, Inc.(16)
- (n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Class B Shares) and A I M
Distributors, Inc.(16)
- (o) Amendment No. 14, dated October 31, 2005, to the Amended
and Restated Master Distribution Plan (Class B Shares) and
A I M Distributors, Inc.(17)
(3) - (a) Amended and Restated Master Distribution Plan dated as of
August 18, 2003, between Registrant (Class C Shares) and A I M
Distributors, Inc.(12)
- (b) Amendment No. 1, dated October 29, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(12)
- (c) Amendment No. 2, dated November 4, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 20, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4, dated November 24, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(12)
- (f) Amendment No. 5, dated November 25, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(12)
- (g) Amendment No. 6, dated March 31, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(13)
- (h) Amendment No. 7, dated April 30, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(13)
- (i) Amendment No. 8, dated September 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(14)
- (j) Amendment No. 9, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(14)
- (k) Amendment No. 10, dated December 30, 2004, to the Amended
and Restated Master Distribution Plan between Registrant
(Class C Shares) and A I M Distributors, Inc.(14)
- (l) Amendment No. 11, dated March 15, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(15)
|
- (m) Amendment No. 12, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan between Registrant (Class C
Shares) and A I M Distributors, Inc.(16)
- (n) Amendment No. 13, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Class C Shares) and A I M
Distributors, Inc.(16)
- (o) Amendment No. 14, dated October 31, 2005, to the Amended
and Restated Master Distribution Plan (Class C Shares) and
A I M Distributors, Inc.(17)
(4) - (a) Amended and Restated Master Distribution Plan dated as of
August 18, 2003, between Registrant (Class R Shares) and A I M
Distributors, Inc.(12)
- (b) Amendment No. 1, dated November 4, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class R Shares) and A I M Distributors, Inc.(12)
- (c) Amendment No. 2, dated November 24, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class R Shares) and A I M Distributors, Inc.(12)
- (d) Amendment No. 3, dated November 25, 2003, to the Amended
and Restated Master Distribution Plan between Registrant
(Class R Shares) and A I M Distributors, Inc.(12)
- (e) Amendment No. 4, dated April 30, 2004, to the Amended and
Restated Master Distribution Plan between Registrant (Class R
Shares) and A I M Distributors, Inc.(13)
- (f) Amendment No. 5, dated September 14, 2004, to the Amended
and Restated Master Distribution Plan (Class R Shares) and
A I M Distributors, Inc.(14)
- (g) Amendment No. 6, dated October 15, 2004, to the Amended
and Restated Master Distribution Plan (Class R Shares) and
A I M Distributors, Inc.(14)
- (h) Amendment No. 7, dated April 29, 2005, to the Amended and
Restated Master Distribution Plan (Class R Shares) and A I M
Distributors, Inc.(16)
- (i) Amendment No. 8, dated July 18, 2005, to the Amended and
Restated Master Distribution Plan (Class R Shares) and A I M
Distributors, Inc.(16)
- (j) Amendment No. 9, dated October 25, 2005, to the Amended
and Restated Master Distribution Plan (Class R Shares) and
A I M Distributors, Inc.(17)
- (k) Amendment No. 10, dated October 31, 2005, to the Amended
and Restated Master Distribution Plan (Class R Shares) and
A I M Distributors, Inc.(17)
(5) - (a) Amended and Restated Master Distribution Plan
(Reimbursement) between Registrant (Investor Class Shares) and
A I M Distributors, Inc., effective July 1, 2004.(18)
|
- (b) Amendment No. 1, dated October 15, 2004, to the Amended and Restated Master Distribution Plan (Reimbursement) between Registrant (Investor Class Shares) and A I M Distributors, Inc., effective July 1, 2004.(18)
- (c) Amendment No. 2, dated April 29, 2005, to the Amended and Restated Master Distribution Plan (Reimbursement) between Registrant (Investor Class Shares) and A I M Distributors, Inc., effective July 1, 2004.(18)
- (d) Amendment No. 3, dated July 18, 2005, to the Amended and Restated Master Distribution Plan (Reimbursement) between Registrant (Investor Class Shares) and A I M Distributors, Inc., effective July 1, 2004.(18)
- (e) Form of Amendment No 4, dated December 14, 2005, to the Amended and Restated Master Distribution Plan (Reimbursement) between Registrant (Investor Class Shares) and A I M Distributors, Inc., effective December 14, 2005.(18)
(6) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class A Shares).(16)
(7) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class C Shares).(11)
(8) - Form of Master Related Agreement to Amended and Restated Master Distribution Plan (Class R Shares).(11)
(9) - Form of Master Related Agreement to Amended and Restated
Master Distribution Plan (Reimbursement) (Investor Class
Shares).(18)
|
(10) - Form of Shareholder Service Agreement to be used in connection with Registrant's Distribution Plans.(6)
(11) - Form of Bank Shareholder Service Agreement to be used in connection with Registrant's Distribution Plans.(6)
(12) - Form of Variable Group Annuity Contractholder Service Agreement.(6)
(13) - Form of Agency Pricing Agreement (for Class A Shares) to be
used in connection with Registrant's Master Distribution
Plans.(10)
(14) - Forms of Shareholder Service Agreements for Bank Trust
Department and for Brokers for Bank Trust Departments to be
used in connection with Registrant's Distribution Plans.(6)
(15) - Form of Shareholder Service Agreement for Shares of the Mutual
Funds to be used in connection with Registrant's Master
Distribution Plan.(6)
n - Eighth 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, as further amended and restated effective August 18,
2003, as further amended and restated effective May 12, 2004,
as further amended and restated effective February 25, 2005,
as further amended and restated effective June 30, 2005 and as
further amended and restated effective August 4, 2005.(16)
o - Reserved.
|
p (1) - A I M Management Group Inc. Code of Ethics, adopted May 1,
1981, as last amended effective January 1, 2005, relating to
A I M Management Group Inc. and A I M Advisors, Inc. and its
wholly owned and indirect subsidiaries.(14)
(2) - Code of Ethics of AIM Growth Series, effective as of September
28, 2000.(6)
q - Powers of attorney for Baker, Bayley, Bunch, Crockett, Dowden,
Dunn, Fields, Frischling, Graham, Lewis, Mathai-Davis,
Pennock, Quigley, Soll, Stickel and Williamson.(17)
----------
|
(1) Incorporated by reference to PEA No. 43, filed on June 1, 1998.
(2) Incorporated by reference to PEA No. 45, filed on August 26, 1998.
(3) Incorporated by reference to PEA No. 46, filed on February 12, 1999.
(4) Incorporated by reference to PEA No. 47, filed on April 14, 1999.
(5) Incorporated by reference to PEA No. 48, filed on April 28, 2000.
(6) Incorporated by reference to PEA No. 49, filed on April 24, 2001.
(7) Incorporated by reference to PEA No. 50, filed on December 28, 2001.
(8) Incorporated by reference to PEA No. 51, filed on April 26, 2002.
(9) Incorporated by reference to PEA No. 52, filed on April 24, 2003.
(10) Incorporated by reference to PEA No. 53, filed on April 24, 2003.
(11) Incorporated by reference to PEA No. 54, filed on August 28, 2003.
(12) Incorporated by reference to PEA No. 55, filed on February 13, 2004.
(13) Incorporated by reference to PEA No. 56, filed on April 30, 2004.
(14) Incorporated by reference to PEA No. 57, filed on February 11, 2005.
(15) Incorporated by reference to PEA No. 58, filed on April 26, 2005.
(16) Incorporated by reference to PEA No. 59, filed on August 11, 2005.
(17) Incorporated by reference to PEA No. 61, filed on October 28, 2005.
(18) Filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control With the Fund
None.
Item 25. Indemnification
Indemnification provisions for officers, trustees, and employees of the Registrant are set forth in Article VIII of the Registrant's Amended and Restated Agreement and Declaration of Trust and Article VIII of its Amended and Restated Bylaws, and are hereby incorporated by reference. See Item 23(a) and (b) above. Under the Amended and Restated Agreement and Declaration of Trust, amended and restated effective as of September 14, 2005, (i) Trustees or officers, when acting in such capacity, shall not be personally liable for any act, omission or obligation of the Registrant or any Trustee or officer except by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office with the Trust; (ii) every Trustee, officer, employee or agent of the Registrant shall be indemnified to the fullest extent permitted under the Delaware Statutory Trust act, the Registrant's Bylaws and other applicable law; (iii) in case any shareholder or former shareholder of the Registrant shall be held to be personally liable solely by reason of his being or having been a shareholder of the Registrant or any portfolio or class and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives, or, in the case of a corporation or other entity, its corporate or general successor) shall be entitled, out of the assets belonging to the applicable portfolio (or allocable to the applicable class), to be held harmless from and indemnified against all loss and expense arising from such liability in accordance with the Bylaws and applicable law. The Registrant, on behalf of the affected portfolio (or class), shall upon request by the shareholder, assume the defense of any such claim made against the shareholder for any act or obligation of that portfolio (or class).
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 and certain other domestic insurers, with limits up to $60,000,000 (plus an additional $20,000,000 limit that 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.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in connection with the successful defense of any action suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and be governed by final adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of the Advisor's directors and officers is with the Advisor and its affiliated companies. Reference is also made to the caption "Fund Management -- The Advisor" in the Prospectus which comprises Part A of the Registration Statement, and to the caption "Investment Advisory and Other Services" of the Statement of Additional Information which comprises Part B of the Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter, also acts as a principal underwriter to the following investment companies:
AIM Counselor Series Trust
AIM Equity Funds
AIM Floating Rate Fund
AIM Funds Group
AIM International Mutual Funds
AIM Investment 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 (with respect to its Investor Class shares)
AIM Variable Insurance Funds
(b)
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Fund
Gene L. Needles Chairman, Director, None
Chief Executive Officer
and President
Mark H. Williamson Director Trustee and
Executive Vice
President
John S. Cooper Executive
Vice President None
James L. Salners Executive
Vice President None
James E. Stueve Executive
Vice President None
Michael A. Bredlau Senior
Vice President None
Kevin M. Carome Senior
Vice President Senior Vice
President,
Secretary
and Chief Legal Officer
Glenda A. Dayton Senior
Vice President None
Lawrence E. Manierre 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
William J. Wendel Senior
Vice President None
Gary K. Wendler Senior
Vice President None
Scott B. Widder Senior
Vice President None
Dawn M. Hawley Vice President
and Treasurer None
Ofelia M. Mayo Vice President,
General Counsel
Assistant Secretary
and Assistant
Secretary
Lance Rejsek Anti-Money Anti-Money
Laundering Laundering
Compliance Officer Compliance Officer
|
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Fund
Rebecca Starling-Klatt Chief Compliance None
Officer and
Assistant Vice
President
Kathleen J. Pflueger Secretary Assistant Secretary
----------
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) Not applicable
Item 28. Location of Accounts and Records
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained
and held in the offices of the Registrant and its custodian, State
Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.
Records covering shareholder accounts and portfolio transactions are
also maintained and kept by the Registrant's Transfer Agent, AIM
Investment Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046, and by the Registrant's custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110.
Item 29. Management Services
None.
Item 30. Undertakings
None.
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant 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 1st day of November, 2005.
REGISTRANT: AIM GROWTH SERIES
By: /s/Robert H. Graham
--------------------
Robert H. Graham, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/Robert H. Graham Trustee & President November 1, 2005
----------------------------------- (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* Chair & 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/ Larry Soll* Trustee
-----------------------------------
(Larry Soll)
/s/ Raymond Stickel, Jr.* Trustee
-----------------------------------
(Raymond Stickel, Jr.
/s/ Mark H. Williamson* Trustee &
----------------------------------- Executive Vice President
(Mark H. Williamson)
Vice President & Treasurer
/s/Sidney M. Dilgren (Principal Financial and November 1, 2005
----------------------------------- Accounting Officer)
(Sidney M. Dilgren)
*By /s/Robert H. Graham
-----------------------------------
Robert H. Graham
Attorney-in-Fact
|
Robert H. Graham, pursuant to powers of attorney dated October 12, 2005.
INDEX
Exhibit
Number Description
a(b) Amendment No. 1 to the Amended and Restated Agreement and
Declaration of Trust of Registrant, dated September 14, 2005
d(j) Amendment No. 9, dated October 31, 2005, to the Master Investment
Advisory Agreement, dated June 5, 2000, between Registrant and
A I M Advisors, Inc.
e(1)(v) Amendment No. 21 to the Amended and Restated Master Distribution
Agreement dated October 31, 2005, between Registrant (all classes
of shares except Class B shares) and A I M Distributors, Inc.
e(1)(w) Form of Amendment No. 22 to the Amended and Restated Master
Distribution Agreement dated as of December 14, 2005, between
Registrant (all classes of shares except Class B shares) and A I M
Distributors, Inc.
e(2)(q) Amendment No. 16 to the Amended and Restated Master Distribution
Agreement, dated October 31, 2005, between Registrant (Class B
shares) and A I M Distributors, Inc.
h(2)(d) Amendment No. 3 to the Master Administrative Services Agreement,
dated October 31, 2005, between Registrant and A I M Advisors, Inc.
h(3)(c) Memorandum of Agreement dated as of October 31, 2005, between
Registrant and A I M Advisors, Inc. with respect to AIM Aggressive
Allocation Fund, AIM Conservative Allocation Fund, AIM Global
Equity Fund, AIM Income Allocation Fund, AIM International
Allocation Fund, AIM Moderate Allocation Fund, AIM Moderate Growth
Allocation Fund and AIM Moderately Conservative Allocation Fund
i Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP
j Consent of PricewaterhouseCoopers LLP
l(c) Initial Capital Agreement dated October 28, 2005, for AIM Income
Allocation Fund and AIM International Allocation Fund
m(5)(a) Amended and Restated Master Distribution Plan (Reimbursement)
between Registrant (Investor Class Shares) and A I M Distributors,
Inc., effective July 1, 2004
m(5)(b) Amendment No. 1, dated October 15, 2004, to the Amended and
Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors, Inc.,
effective July 1, 2004
m(5)(c) Amendment No. 2, dated April 29, 2005, to the Amended and Restated
Master Distribution Plan (Reimbursement) between Registrant
(Investor Class Shares) and A I M Distributors, Inc., effective
July 1, 2004
m(5)(d) Amendment No. 3, dated July 18, 2005, to the Amended and Restated
Master Distribution Plan (Reimbursement) between Registrant
(Investor Class Shares) and A I M Distributors, Inc., effective
July 1, 2004
m(5)(e) Amendment No 4, dated December 14, 2005, to the Amended and
Restated Master Distribution Plan (Reimbursement) between
Registrant (Investor Class Shares) and A I M Distributors, Inc.,
effective December 14, 2005
m(9) Form of Master Related Agreement to Amended and Restated Master
Distribution Plan (Reimbursement) (Investor Class Shares)
|
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
OF
AIM GROWTH SERIES
This Amendment No. 1 ("Amendment") to the Amended and Restated Agreement and Declaration of Trust of AIM Growth Series amends, effective as of October 27, 2005, the Amended and Restated Agreement and Declaration of Trust of AIM Growth Series (the "Trust") dated as of September 14, 2005 (the "Agreement").
Under Section 9.7 of the Agreement, a duly authorized officer of the Trust may execute this Amendment.
WHEREAS, the Trust desires to amend the Agreement to add Investor Class Shares to AIM Small Cap Growth Fund;
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is amended and restated to read in its entirety as set forth on Exhibit 1 to the Amendment.
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of October 27, 2005.
By: /s/Robert H. Graham
----------------------
Name: Robert H. Graham
Title: President
|
Exhibit 1 TO AMENDMENT No. 1
TO
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF AIM GROWTH SERIES
"SCHEDULE A
AIM GROWTH SERIES
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM Basic Value Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Conservative Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Global Equity Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Growth Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Income Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM International Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
|
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM Mid Cap Core Equity Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Moderate Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Moderate Growth Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Moderately Conservative Allocation Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
AIM Small Cap Growth Fund Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
Investor Class Shares"
|
AMENDMENT NO. 9
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of October 31, 2005, amends the Master Investment Advisory Agreement (the "Agreement"), dated June 5, 2000, between AIM Growth Series, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to add two new portfolios - AIM Income Allocation Fund and AIM International Allocation Fund;
NOW, THEREFORE, the parties agree as follows;
1. Appendix A and Appendix B to the Agreement are hereby deleted in their entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT
----------------------------------------- ------------------------------------
AIM Basic Value Fund June 5, 2000
AIM Conservative Allocation Fund April 30, 2004
AIM Global Equity Fund November 4, 2003
AIM Growth Allocation Fund April 30, 2004
AIM Income Allocation Fund October 31, 2005
AIM International Allocation Fund October 31, 2005
AIM Mid Cap Core Equity Fund September 1, 2001
AIM Moderate Allocation Fund April 30, 2004
AIM Moderate Growth Allocation Fund April 29, 2005
AIM Moderately Conservative April 29, 2005
Allocation Fund
AIM Small Cap Growth Fund September 11, 2000
|
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund.
AIM BASIC VALUE FUND
AIM MID CAP CORE EQUITY FUND
AIM SMALL CAP GROWTH FUND
NET ASSETS ANNUAL RATE
------------------------ -----------
First $500 million......................................... 0.725%
Next $500 million.......................................... 0.70%
Next $500 million.......................................... 0.675%
Excess over $1.5 billion................................... 0.65%
|
AIM GLOBAL EQUITY 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 CONSERVATIVE ALLOCATION FUND
AIM GROWTH ALLOCATION FUND
AIM INCOME ALLOCATION FUND
AIM INTERNATIONAL ALLOCATION FUND
AIM MODERATE ALLOCATION FUND
AIM MODERATE GROWTH ALLOCATION FUND
AIM MODERATELY CONSERVATIVE ALLOCATION FUND
These seven funds do not pay an advisory fee."
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
AIM GROWTH SERIES
Attest: /s/ Ofelia M. Mayo By: /s/ Robert H. Graham
-------------------------------- --------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
AIM ADVISORS, INC.
Attest: /s/ Ofelia M. Mayo By: /s/ Mark H. Williamson
------------------------------- ---------------------------
Assistant Secretary Mark H. Williamson
President
(SEAL)
|
AMENDMENT NO. 21 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 to reflect the addition of AIM Income Allocation Fund, AIM International Allocation Fund, AIM Summit Fund and Class R shares of AIM Global Equity Fund.
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 COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 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
Investor Class
|
AIM Charter Fund - Class A
Class C
Class R
Institutional Class
AIM Constellation Fund - Class A
Class C
Class R
Institutional Class
AIM Diversified Dividend Fund - Class A
Class C
Class R
Institutional Class
Investor Class
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
AIM Select Basic Value Fund - Class A
Class C
AIM Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
Institutional Class
2
|
AIM International Small Company Fund - Class A
Class C
Institutional Class
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
Institutional Class
AIM GROWTH SERIES
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
Class R
Institutional Class
AIM Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Income Allocation Fund - Class A
Class C
Class R
Institutional Class
3
|
AIM International Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Moderately Conservative 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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
4
|
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
Institutional Class
AIM Global Health Care Fund - Class A
Class C
Investor Class
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 Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
AIM Income Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Institutional Class
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
AIM Energy Fund - Class A
Class C
Investor Class
AIM Financial Services Fund - Class A
Class C
Investor Class
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Leisure Fund - Class A
Class C
Class R
Investor Class
AIM Technology Fund - Class A
Class C
Institutional Class
Investor Class
AIM Utilities Fund - Class A
Class C
Institutional Class
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
AIM Dynamics Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM S&P 500 Index Fund - Institutional Class
Investor Class
AIM SUMMIT FUND Class A
Class C
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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier Portfolio Investor Class
Premier Tax-Exempt Portfolio Investor Class
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: October 31, 2005
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. 23 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 to reflect the addition of Investor Class shares of AIM Small Cap Growth Fund.
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 COUNSELOR SERIES TRUST
AIM Advantage Health Sciences Fund - Class A
Class C
AIM 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 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
Investor Class
|
AIM Charter Fund - Class A
Class C
Class R
Institutional Class
AIM Constellation Fund - Class A
Class C
Class R
Institutional Class
AIM Diversified Dividend Fund - Class A
Class C
Class R
Institutional Class
Investor Class
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
AIM Select Basic Value Fund - Class A
Class C
AIM Weingarten Fund - Class A
Class C
Class R
Institutional Class
AIM FUNDS GROUP
AIM Basic Balanced Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM European Small Company Fund - Class A
Class C
AIM Global Value Fund - Class A
Class C
Institutional Class
|
AIM International Small Company Fund - Class A
Class C
Institutional Class
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
Institutional Class
AIM GROWTH SERIES
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
Class R
Institutional Class
AIM Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Income Allocation Fund - Class A
Class C
Class R
Institutional Class
3
|
AIM International Allocation Fund - Class A
Class C
Class R
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 Moderate Growth Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Moderately Conservative Allocation Fund - Class A
Class C
Class R
Institutional Class
AIM Small Cap Growth Fund - Class A
Class C
Class R
Institutional Class
Investor 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 Core Equity Fund - Class A
Class C
Class R
Institutional Class
Investor Class
|
AIM International Growth Fund - Class A
Class C
Class R
Institutional Class
AIM INVESTMENT FUNDS
AIM Developing Markets Fund - Class A
Class C
Institutional Class
AIM Global Health Care Fund - Class A
Class C
Investor Class
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 Global Real Estate Fund - Class A
Class C
Class R
Institutional Class
AIM High Yield Fund - Class A
Class C
Institutional Class
Investor Class
AIM Income Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Intermediate Government Fund - Class A
Class C
Class R
Institutional Class
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
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
AIM Energy Fund - Class A
Class C
Institutional Class
Investor Class
AIM Financial Services Fund - Class A
Class C
Investor Class
AIM Gold & Precious Metals Fund - Class A
Class C
Investor Class
AIM Leisure Fund - Class A
Class C
Class R
Investor Class
AIM Technology Fund - Class A
Class C
Institutional Class
Investor Class
|
AIM Utilities Fund - Class A
Class C
Institutional Class
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
AIM Dynamics Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM Small Company Growth Fund - Class A
Class C
Class R
Institutional Class
Investor Class
AIM S&P 500 Index Fund - Institutional Class
Investor Class
AIM SUMMIT FUND Class A
Class C
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
Institutional Class
AIM TREASURER'S SERIES TRUST
Premier Portfolio Investor Class
Premier Tax-Exempt Portfolio Investor Class
Premier U.S. Government Money Portfolio Investor Class"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: March __, 2006
EACH FUND (LISTED ON SCHEDULE A) ON BEHALF OF
THE SHARES OF EACH PORTFOLIO LISTED ON
SCHEDULE A
A I M DISTRIBUTORS, INC.
AMENDMENT NO. 16
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:
WHEREAS, the parties desire to amend the Agreement to reflect the addition of AIM Income Allocation Fund, AIM International Allocation Fund and AIM Summit Fund;
NOW, THEREFORE, 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: October 31, 2005
EACH FUND LISTED ON SCHEDULE A-1 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-1
By: /s/ Robert H. Graham
-------------------------------------
Name: Robert H. Graham
Title: President
|
EACH FUND LISTED ON SCHEDULE A-2 ON
BEHALF OF THE SHARES OF EACH PORTFOLIO
LISTED ON SCHEDULE A-2
By: /s/ Robert H. Graham
-------------------------------------
Name: Robert H. Graham
Title: President
|
A I M DISTRIBUTORS, INC.
By: /s/ Gene Needles
-------------------------------------
Name: Gene 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 Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Diversified Dividend Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund
AIM Select Basic Value Fund
AIM Weingarten Fund
AIM FUNDS GROUP
PORTFOLIOS
AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Small Company 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 Conservative Allocation Fund
AIM Global Equity Fund
AIM Growth Allocation Fund
AIM Income Allocation Fund
AIM International Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Moderate Growth Allocation Fund
AIM Moderately Conservative Allocation 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 Core Equity Fund
AIM International Growth Fund
AIM INVESTMENT FUNDS
PORTFOLIOS
AIM Developing Markets Fund
AIM Global Health Care Fund
AIM Trimark Fund
AIM Trimark Endeavor Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIOS
AIM Global Real Estate Fund
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 SUMMIT 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 COUNSELOR SERIES TRUST
PORTFOLIOS
AIM Advantage Health Sciences Fund
AIM Multi-Sector Fund
AIM SECTOR FUNDS
PORTFOLIOS
AIM Energy Fund
AIM Financial Services Fund
AIM Gold & Precious Metals Fund
AIM Leisure Fund
AIM Technology Fund
AIM Utilities Fund
AIM STOCK FUNDS
AIM Dynamics Fund
AIM Small Company Growth Fund
AMENDMENT NO. 3
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated July 1, 2004, by and between A I M Advisors, Inc., a Delaware corporation, and AIM Growth Series, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to add two new portfolios - AIM Income Allocation Fund and AIM International Allocation Fund;
NOW, THEREFORE, the parties agree as follows:
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM GROWTH SERIES
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT
---------- ---------------------------
AIM Basic Value Fund June 5, 2000
AIM Conservative Allocation Fund April 30, 2004
AIM Global Equity Fund November 4, 2003
AIM Growth Allocation Fund April 30, 2004
AIM Income Allocation Fund October 31, 2005
AIM International Allocation Fund October 31, 2005
AIM Mid Cap Core Equity Fund September 1, 2001
AIM Moderate Allocation Fund April 30, 2004
AIM Moderate Growth Allocation Fund April 29, 2005
AIM Moderately Conservative Allocation Fund April 29, 2005
AIM Small Cap Growth Fund September 11, 2000"
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: October 31st, 2005
A I M ADVISORS, INC.
Attest: /s/ Ofelia M. Mayo By: /s/ Mark H. Williamson
---------------------------- --------------------------------
Assistant Secretary Mark H. Williamson
President
(SEAL)
AIM GROWTH SERIES
Attest: /s/ Ofelia M. Mayo By: Robert H. Graham
---------------------------- --------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of the Effective Date on the attached exhibits (the "Exhibits"), between AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust (each a "Trust" or, collectively, the "Trusts"), on behalf of the funds listed on the Exhibits to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the Memorandum of Agreement dated July 1, 2005 between AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust. AIM shall and hereby agrees to waive fees or reimburse expenses of each Fund, on behalf of its respective classes as applicable, severally and not jointly, as indicated in the attached Exhibits.
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trusts and AIM agree as follows:
The Trusts and AIM agree until the date set forth on the attached Exhibits (the "Expiration Date") that AIM will waive its fees or reimburse expenses to the extent that expenses (excluding (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (these are expenses that are not anticipated to arise from each Fund's day-to-day operations), or items designated as such by the Funds' Board of Trustees; (v) expenses related to a merger or reorganization, as approved by the Funds' Board of Trustees; and (vi) expenses that each Fund has incurred but did not actually pay because of an expense offset arrangement, if applicable) of a class of a Fund exceed the rate, on an annualized basis, set forth on the Exhibits of the average daily net assets allocable to such class. The Board of Trustees and AIM may terminate or modify this Memorandum of Agreement prior to the Expiration Date only by mutual written consent. AIM will not have any right to reimbursement of any amount so waived or reimbursed.
Each of the Trusts and AIM agree to review the then-current waivers or expense limitations for each class of each Fund listed on the Exhibits on a date prior to the Expiration Date to determine whether such waivers or limitations should be amended, continued or terminated. The waivers or expense limitations will expire upon the Expiration Date unless the Trust and AIM have agreed to continue them. The Exhibits will be amended to reflect any such agreement.
It is expressly agreed that the obligations of each Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trusts personally, but shall only bind the assets and property of each Fund, as provided in each Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trusts, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trusts acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the Trusts and AIM have entered into this Memorandum of Agreement as of the Effective Date on the attached Exhibits.
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM STOCK FUNDS
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
on behalf of the Funds listed in Exhibit "A"
to this Memorandum of Agreement
By: /s/ Robert H. Graham ----------------------------------- Title: President |
A I M Advisors, Inc.
By: /s/ Mark H. Williamson ----------------------------------- Title: President |
as of November 1, 2005
EXHIBIT "A"
FUNDS WITH FISCAL YEAR END OF MARCH 31
AIM SECTOR FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ---------------- ---------------
AIM Energy Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Financial Services Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Gold & Precious Metals Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Leisure Fund(1)
Class A Shares 1.90% July 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Class R Shares 2.15% October 25, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
AIM Technology Fund(1)
Class A Shares 1.55% July 1, 2005 June 30, 2006
Class B Shares 2.30% July 1, 2005 June 30, 2006
Class C Shares 2.30% July 1, 2005 June 30, 2006
Investor Class Shares 1.55% July 1, 2005 June 30, 2006
Institutional Class Shares 1.30% July 1, 2005 June 30, 2006
AIM Utilities Fund(1)
Class A Shares 1.90% April 1, 2005 March 31, 2006
Class B Shares 2.65% April 1, 2005 March 31, 2006
Class C Shares 2.65% April 1, 2005 March 31, 2006
Investor Class Shares 1.90% April 1, 2005 March 31, 2006
Institutional Class Shares 1.65% October 25, 2005 March 31, 2006
|
FUNDS WITH FISCAL YEAR END OF JULY 31
AIM INVESTMENT SECURITIES FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ -------------- ---------------
AIM Global Real Estate Fund(1)
Class A Shares 1.40% July 1, 2005 July 31, 2006
Class B Shares 2.15% April 29, 2005 July 31, 2006
Class C Shares 2.15% April 29, 2005 July 31, 2006
Class R Shares 1.65% April 29, 2005 July 31, 2006
Institutional Class Shares 1.15% April 29, 2005 July 31, 2006
AIM Short Term Bond Fund(1)
Class A Shares 0.85% July 1, 2005 July 31, 2006
Class C Shares 1.20%(2) August 1, 2005 July 31, 2006
Class R Shares 1.10% August 1, 2005 July 31, 2006
Institutional Class Shares 0.60% August 1, 2005 July 31, 2006
AIM Total Return Bond Fund(1)
Class A Shares 1.15% July 1, 2005 July 31, 2006
Class B Shares 1.90% August 1, 2005 July 31, 2006
Class C Shares 1.90% August 1, 2005 July 31, 2006
Class R Shares 1.40% August 1, 2005 July 31, 2006
Institutional Class Shares 0.90% August 1, 2005 July 31, 2006
|
AIM STOCK FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ---------------- ---------------
AIM Dynamics Fund(1)
Class A Shares 1.90% July 1, 2005 July 31, 2006
Class B Shares 2.65% August 1, 2005 July 31, 2006
Class C Shares 2.65% August 1, 2005 July 31, 2006
Class R Shares 2.15% October 25, 2005 July 31, 2006
Investor Class Shares 1.90% August 1, 2005 July 31, 2006
Institutional Class Shares 1.65% August 1, 2005 July 31, 2006
AIM Small Company Growth Fund(1)
Class A Shares 1.90% July 1, 2005 July 31, 2006
Class B Shares 2.65% August 1, 2005 July 31, 2006
Class C Shares 2.65% August 1, 2005 July 31, 2006
Class R Shares 2.15% October 25, 2005 July 31, 2006
Investor Class Shares 1.90% August 1, 2005 July 31, 2006
Institutional Class Shares 1.65% July 13, 2005 July 31, 2006
AIM S&P 500 Index Fund(1)
Investor Class Shares 0.60% July 1, 2005 July 31, 2006
Institutional Class Shares 0.35% July 1, 2005 July 31, 2006
|
FUNDS WITH FISCAL YEAR END OF AUGUST 31
AIM COUNSELOR SERIES TRUST
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ----------------- ----------------
AIM Multi-Sector Fund(1)
Class A Shares 1.90% July 1, 2005 August 31, 2006
Class B Shares 2.65% September 1, 2005 August 31, 2006
Class C Shares 2.65% September 1, 2005 August 31, 2006
Institutional Class Shares 1.65% September 1, 2005 August 31, 2006
|
FUNDS WITH FISCAL YEAR END OF OCTOBER 31
AIM EQUITY FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ----------------- ----------------
AIM Diversified Dividend Fund(1)
Class A Shares 1.40% November 1, 2005 October 31, 2006
Class B Shares 2.15% November 1, 2005 October 31, 2006
Class C Shares 2.15% November 1, 2005 October 31, 2006
Investor Class Shares 1.40% November 1, 2005 October 31, 2006
Institutional Class Shares 1.15% November 1, 2005 October 31, 2006
AIM Large Cap Basic Value Fund(1)
Class A Shares 1.22% July 1, 2005 October 31, 2006
Class B Shares 1.97% July 1, 2005 October 31, 2006
Class C Shares 1.97% July 1, 2005 October 31, 2006
Class R Shares 1.47% July 1, 2005 October 31, 2006
Investor Class Shares 1.22% July 1, 2005 October 31, 2006
Institutional Class Shares 0.97% July 1, 2005 October 31, 2006
AIM Large Cap Growth Fund(1)
Class A Shares 1.32% July 1, 2005 October 31, 2006
Class B Shares 2.07% July 1, 2005 October 31, 2006
Class C Shares 2.07% July 1, 2005 October 31, 2006
Class R Shares 1.57% July 1, 2005 October 31, 2006
Investor Class Shares 1.32% July 1, 2005 October 31, 2006
Institutional Class Shares 1.07% July 1, 2005 October 31, 2006
|
AIM INTERNATIONAL MUTUAL FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ----------------- ----------------
AIM International Core Equity Fund(1)
Class A Shares 2.00% November 1, 2005 October 31, 2006
Class B Shares 2.75% November 1, 2005 October 31, 2006
Class C Shares 2.75% November 1, 2005 October 31, 2006
Class R Shares 2.25% November 1, 2005 October 31, 2006
Investor Class Shares 2.00% November 1, 2005 October 31, 2006
Institutional Class Shares 1.75% November 1, 2005 October 31, 2006
|
AIM INVESTMENT FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ ------------------ ----------------
AIM Developing Markets Fund(1)
Class A Shares 1.75% November 1, 2005 October 31, 2006
Class B Shares 2.50% November 1, 2005 October 31, 2006
Class C Shares 2.50% November 1, 2005 October 31, 2006
Institutional Class Shares 1.50% November 1, 2005 October 31, 2006
AIM Trimark Endeavor Fund(1)
Class A Shares 1.90% November 1, 2005 October 31, 2006
Class B Shares 2.65% November 1, 2005 October 31, 2006
Class C Shares 2.65% November 1, 2005 October 31, 2006
Class R Shares 2.15% November 1, 2005 October 31, 2006
Institutional Class Shares 1.65% November 1, 2005 October 31, 2006
AIM Trimark Fund(1)
Class A Shares 2.15% November 1, 2005 October 31, 2006
Class B Shares 2.90% November 1, 2005 October 31, 2006
Class C Shares 2.90% November 1, 2005 October 31, 2006
Class R Shares 2.40% November 1, 2005 October 31, 2006
Institutional Class Shares 1.90% November 1, 2005 October 31, 2006
AIM Trimark Small Companies Fund(1)
Class A Shares 1.50% September 30, 2005 October 31, 2006
Class B Shares 2.25% September 30, 2005 October 31, 2006
Class C Shares 2.25% September 30, 2005 October 31, 2006
Class R Shares 1.75% September 30, 2005 October 31, 2006
Institutional Class Shares 1.25% September 30, 2005 October 31, 2006
|
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A 12b-1 rate.
FUNDS WITH FISCAL YEAR END OF DECEMBER 31
AIM FUNDS GROUP
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
-------------------------------------- ------------------ ---------------- -----------------
AIM European Small Company Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
AIM Global Value Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
Institutional Class Shares 1.65% October 25, 2005 December 31, 2005
AIM International Small Company Fund(1)
Class A Shares 1.90% July 1, 2005 December 31, 2005
Class B Shares 2.65% January 1, 2005 December 31, 2005
Class C Shares 2.65% January 1, 2005 December 31, 2005
Institutional Class Shares 1.65% October 25, 2005 December 31, 2005
|
AIM GROWTH SERIES
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
----------------------------------- ------------------ --------------- -----------------
AIM Global Equity Fund(1)
Class A Shares 1.75% July 1, 2005 December 31, 2005
Class B Shares 2.50% January 1, 2005 December 31, 2005
Class C Shares 2.50% January 1, 2005 December 31, 2005
Class R Shares 2.00% October 28, 2005 December 31, 2005
Institutional Class Shares 1.50% January 1, 2005 December 31, 2005
|
EXHIBIT "B"
AIM GROWTH SERIES
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
-------------------------------------- ---------------------------------------- --------------- -----------------
AIM Conservative Allocation Fund
Class A Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.20% of average April 29, 2004 December 31, 2005
daily net assets
AIM Growth Allocation Fund
Class A Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.17% of average April 29, 2004 December 31, 2005
daily net assets
AIM Income Allocation Fund
Class A Limit Other Expenses to 0.04% of average October 31, 2005 December 31, 2006
daily net assets
Class B Limit Other Expenses to 0.04% of average October 31, 2005 December 31, 2006
daily net assets
Class C Limit Other Expenses to 0.04% of average October 31, 2005 December 31, 2006
daily net assets
Class R Limit Other Expenses to 0.04% of average October 31, 2005 December 31, 2006
daily net assets
Institutional Class Limit Other Expenses to 0.04% of average October 31, 2005 December 31, 2006
daily net assets
AIM International Allocation Fund
Class A Limit Other Expenses to 0.18% of average October 31, 2005 December 31, 2006
daily net assets
Class B Limit Other Expenses to 0.18% of average October 31, 2005 December 31, 2006
daily net assets
Class C Limit Other Expenses to 0.18% of average October 31, 2005 December 31, 2006
daily net assets
Class R Limit Other Expenses to 0.18% of average October 31, 2005 December 31, 2006
daily net assets
Institutional Class Limit Other Expenses to 0.18% of average October 31, 2005 December 31, 2006
daily net assets
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
-------------------------------------- ---------------------------------------- --------------- -----------------
AIM Moderate Allocation Fund
Class A Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class B Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class C Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Class R Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
Institutional Class Shares Limit Other Expenses to 0.05% of average April 29, 2004 December 31, 2005
daily net assets
AIM Moderate Growth Allocation Fund
Class A Shares
Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
Class B Shares daily net assets
Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
Class C Shares daily net assets
Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
Class R Shares daily net assets
Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
Institutional Class Shares daily net assets
Limit Other Expenses to 0.12% of average April 29, 2005 December 31, 2006
daily net assets
AIM Moderately Conservative Allocation
Fund
Class A Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class B Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class C Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Class R Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
Institutional Class Shares Limit Other Expenses to 0.14% of average April 29, 2005 December 31, 2006
daily net assets
|
Other Expenses are defined as all normal operating expenses of the fund, excluding management fees and 12b-1 expenses. The expense limitation is subject to the exclusions as listed in the Memorandum of Agreement.
EXHIBIT "C"
FUNDS WITH FISCAL YEAR END OF MARCH 31
TAX-FREE INVESTMENTS TRUST
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---------------------------------- ------------------ -------------- ---------------
Tax-Free Cash Reserve Portfolio(1,2)
Cash Management Class 0.22% June 30, 2005 March 31, 2007
Corporate Class 0.22% June 30, 2005 March 31, 2007
Institutional Class 0.22% June 30, 2005 March 31, 2007
Personal Investment Class 0.22% June 30, 2005 March 31, 2007
Private Investment Class 0.22% June 30, 2005 March 31, 2007
Reserve Class 0.22% June 30, 2005 March 31, 2007
Resource Class 0.22% June 30, 2005 March 31, 2007
|
FUNDS WITH FISCAL YEAR END OF AUGUST 31
SHORT-TERM INVESTMENTS TRUST
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---------------------------------- ------------------ -------------- ---------------
Government & Agency Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
Government Tax Advantage Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
Liquid Assets Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---------------------------------- ------------------ -------------- ---------------
STIC Prime Portfolio(1) 0.12% June 30, 2005 August 31, 2006
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class
Treasury Portfolio(1)
Cash Management Class 0.12% June 30, 2005 August 31, 2006
Corporate Class 0.12% June 30, 2005 August 31, 2006
Institutional Class 0.12% June 30, 2005 August 31, 2006
Personal Investment Class 0.12% June 30, 2005 August 31, 2006
Private Investment Class 0.12% June 30, 2005 August 31, 2006
Reserve Class 0.12% June 30, 2005 August 31, 2006
Resource Class 0.12% June 30, 2005 August 31, 2006
|
EXHIBIT "D"
AIM VARIABLE INSURANCE FUNDS
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---------------------------------- ------------------ -------------- ---------------
AIM V.I. Aggressive Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Balanced Fund
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
AIM V.I. Basic Value Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Blue Chip Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Capital Appreciation Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Capital Development Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Core Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Core Stock Fund
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
------------------------------------- ------------------ ---------------- --------------
AIM V.I. Dent Demographic Trends Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Diversified Income Fund
Series I Shares 0.75% July 1, 2005 June 30, 2006
Series II Shares 1.00% July 1, 2005 June 30, 2006
AIM V.I. Dynamics Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Financial Services Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Government Securities Fund
Series I Shares 0.73% July 1, 2005 June 30, 2006
Series II Shares 0.98% July 1, 2005 June 30, 2006
AIM V.I. Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Health Sciences Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. High Yield Fund
Series I Shares 0.95% July 1, 2005 June 30, 2006
Series II Shares 1.20% July 1, 2005 June 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
---------------------------------- ------------------ ---------------- ---------------
AIM V.I. International Growth Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Large Cap Growth Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Leisure Fund
Series I Shares 1.01% July 1, 2005 June 30, 2006
Series II Shares 1.26% July 1, 2005 June 30, 2006
AIM V.I. Mid Cap Core Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Money Market Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Premier Equity Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Real Estate Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
AIM V.I. Small Cap Equity Fund
Series I Shares 1.15% July 1, 2005 June 30, 2006
Series II Shares 1.40% July 1, 2005 June 30, 2006
AIM V.I. Small Company Growth Fund
Series I Shares 1.20% July 1, 2005 June 30, 2006
Series II Shares 1.45% July 1, 2005 June 30, 2006
AIM V.I. Technology Fund
Series I Shares 1.30% January 1, 2005 April 30, 2006
Series II Shares 1.45% January 1, 2005 April 30, 2006
|
FUND EXPENSE LIMITATION EFFECTIVE DATE EXPIRATION DATE
------------------------- ------------------ ------------------ ---------------
Series I Shares 0.91% July 1, 2005 June 30, 2006
Series II Shares 1.16% July 1, 2005 June 30, 2006
AIM V.I. Utilities Fund
Series I Shares 0.93% September 23, 2005 April 30, 2007
Series II Shares 1.18% September 23, 2005 April 30, 2007
|
LAW OFFICES
BALLARD SPAHR ANDREWS & INGERSOLL, LLP BALTIMORE, MD
1735 MARKET STREET, 51ST FLOOR DENVER, CO
PHILADELPHIA, PENNSYLVANIA 19103-7599 SALT LAKE CITY, UT
215-665-8500 VOORHEES, NJ
FAX: 215-864-8999 WASHINGTON, DC
www.ballardspahr.com WILMINGTON, DE
October 31, 2005
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: AIM Growth Series
Registration Statement on Form N-1A
Ladies and Gentlemen:
We have acted as counsel to AIM Growth Series, a statutory trust organized under the laws of the State of Delaware (the "Trust") and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end, series management investment company.
This opinion is given in connection with the filing by the Trust of Post-Effective Amendment No. 62 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and Amendment No. 58 to such Registration Statement under the 1940 Act (collectively, the "Registration Statement") relating to the registration of an indefinite number of Investor Class shares of beneficial interest, par value $0.01 per share (the "Shares"), of AIM Small Cap Growth Fund (the "Fund").
In connection with giving this opinion, we have examined copies of the Trust's Amended and Restated Certificate of Trust, Amended and Restated Agreement and Declaration of Trust, as amended (the "Trust Agreement"), and resolutions of the Board of Trustees adopted October 26-27, 2005, and originals or copies, certified or otherwise identified to our satisfaction, of such other documents, records and other instruments as we have deemed necessary or advisable for purposes of this opinion. We have also examined the prospectus for the Fund, which is included in the Registration Statement, substantially in the form in which it is to be filed (the "Prospectus"). As to various questions of fact material to our opinion, we have relied upon information provided by officers of the Trust.
The Prospectus provides for issuance of the Shares from time to time at the net asset value thereof, plus any applicable sales charge. In connection with our giving this opinion, we assume that upon sale of the Shares the Trust will receive the net asset value thereof.
DMEAST #9283085 v2
AIM Growth Series
October 31, 2005
Based on the foregoing, we are of the opinion that the Shares to be offered for sale pursuant to the Prospectus are duly authorized and, when sold, issued and paid for as described in the Prospectus, will be validly issued, fully paid and nonassessable.
We express no opinion concerning the laws of any jurisdiction other than the federal law of the United States of America and the Delaware Statutory Trust Act.
Both the Delaware Statutory Trust Act and the Trust Agreement provide that shareholders of the Trust shall be entitled to the same limitation on personal liability as is extended under the Delaware General Corporation Law to stockholders of private corporations for profit. There is a remote possibility, however, that, under certain circumstances, shareholders of a Delaware statutory trust may be held personally liable for that trust's obligations to the extent that 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 also provides for indemnification out of property of the Fund for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Therefore, the risk of any shareholder incurring financial loss beyond his investment due to shareholder liability is limited to circumstances in which the Fund is unable to meet its obligations and the express limitation of shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and to the reference to our firm under the caption "Investment Advisory and Other Services - Other Service Providers - Counsel to the Trust" in the Statement of Additional Information for the Fund, which are included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP |
DMEAST #9283085 v2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form N-1A of our seven reports each dated February 18, 2005, relating to the financial statements and financial highlights of AIM Growth Series, which appear in such Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Other Service Providers" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
----------------------------------------
PricewaterhouseCoopers LLP
Houston, Texas
November 1, 2005
|
October 28, 2005
Board of Trustees
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Re: Initial Capital Investment In New Portfolios Of AIM Growth Series (The "Fund")
Ladies and Gentlemen:
We are purchasing shares of the Fund for the purpose of providing initial investment for two new investment portfolios of the Fund. The purpose of this letter is to set out our understanding of the conditions of and our promises and representations concerning this investment.
We hereby agree to purchase shares equal to the following dollar amount for each portfolio:
FUND AMOUNT DATE
-------------------------------------------------------------- ---------- ----------------
AIM Income Allocation Fund - Class A Shares $ 10.00 October 28, 2005
AIM Income Allocation Fund - Class B Shares $ 10.00 October 28, 2005
AIM Income Allocation Fund - Class C Shares $ 10.00 October 28, 2005
AIM Income Allocation Fund - Class R Shares $ 10.00 October 28, 2005
AIM Income Allocation Fund - Institutional Class Shares $ 10.00 October 28, 2005
AIM International Allocation Fund - Class A Shares $ 10.00 October 28, 2005
AIM International Allocation Fund - Class B Shares $ 10.00 October 28, 2005
AIM International Allocation Fund - Class C Shares $ 10.00 October 28, 2005
AIM International Allocation Fund - Class R Shares $ 10.00 October 28, 2005
AIM International Allocation Fund - Institutional Class Shares $ 10.00 October 28, 2005
AIM Income Allocation Fund - Class A Shares $ 50,000 October 31, 2005
AIM Income Allocation Fund - Class B Shares $ 50,000 October 31, 2005
AIM Income Allocation Fund - Class C Shares $ 50,000 October 31, 2005
AIM Income Allocation Fund - Class R Shares $ 50,000 October 31, 2005
AIM Income Allocation Fund - Institutional Class Shares $ 50,000 October 31, 2005
|
October 28, 2005
FUND AMOUNT DATE
-------------------------------------------------------------- ------- ------------------
AIM International Allocation Fund - Class A Shares $50,000 October 31, 2005
AIM International Allocation Fund - Class B Shares $50,000 October 31, 2005
AIM International Allocation Fund - Class C Shares $50,000 October 31, 2005
AIM International Allocation Fund - Class R Shares $50,000 October 31, 2005
AIM International Allocation Fund - Institutional Class Shares $50,000 October 31, 2005
|
We understand that the initial net asset value per share for each portfolio named above will be $10.00.
We hereby represent that we are purchasing these shares solely for our own account and solely for investment purposes without any intent of distributing or reselling said shares. We further represent that disposition of said shares will only be by direct redemption to or repurchase by the Fund.
We further agree to provide the Fund with at least three days' advance written notice of any intended redemption and agree that we will work with the Fund with respect to the amount of such redemption so as not to place a burden on the Fund and to facilitate normal portfolio management of the Fund.
Sincerely yours,
A I M ADVISORS, INC.
/s/ Mark H. Williamson ------------------------ Mark H. Williamson President |
cc: Mark Gregson
David Hessel
Gary Trappe
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
(EFFECTIVE JULY 1, 2004)
SECTION 1. Each registered investment company, as described in Schedule A to this plan (each individually referred to as "Fund", or collectively, "Funds"), severally, on behalf of each of its series of beneficial interest set forth in Schedule A to this plan (each, a "Portfolio"), may act as a distributor of the Investor Class Shares of such Portfolio (the "Shares") of which such Fund is the issuer, pursuant to Rule12b-1 under the Investment Company Act of 1940 (the "1940 Act"), according to the terms of this Amended and Restated Master Distribution Plan (the "Plan").
SECTION 2. Each Fund, on behalf of a Portfolio, is hereby authorized to expend, out of its assets, on a monthly basis, and shall reimburse A I M Distributors, Inc. ("Distributors") to such extent, for Distributors' actual direct expenditures incurred over a rolling twelve-month period (or the rolling twenty-four month period specified below) in engaging in the activities and providing the services specified in Sections 3 and 4 below, an amount computed at an annual rate of 0.25% of the average daily net assets of such Portfolio during the month. Distributors shall not be entitled hereunder to reimbursement for overhead expenses (overhead expenses defined as customary overhead not including the costs of Distributors' personnel whose primary responsibilities involve marketing of the Funds). Payments by a Fund on behalf of a Portfolio hereunder, for any month, may be made only with respect to: (a) expenditures incurred by Distributors during the rolling twelve-month period in which that month falls, or (b) to the extent permitted by applicable law, for any month during the first twenty-four months following a Portfolio's commencement of operations, expenditures incurred by Distributors during the rolling twenty-four month period in which that month falls, and any expenditures incurred in excess of the limitations described above are not reimbursable. No Fund on behalf of a Portfolio shall be authorized to expend, for any month, a greater amount out of its assets to reimburse Distributors for expenditures incurred during the rolling twenty-four month period referred to above than it would otherwise be authorized to expend out of its assets to reimburse Distributors for expenditures incurred during the rolling twelve-month period referred to above.
Expenses incurred pursuant to this Plan shall be subject to any applicable limitations imposed from time to time by the applicable rules of NASD Inc. ("NASD").
SECTION 3. The Fund may expend amounts under this Plan to finance distribution-related services for the Shares of each Portfolio. Distribution-related services shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering this Plan.
The Fund has selected Distributors to provide distribution-related services on behalf of and for the Shares of each Portfolio. Distributors may provide such distribution-related services either directly or through third parties.
The specific activities and services to be provided by Distributors hereunder shall include one or more of the following: (a) the payment of compensation (including trail commissions and incentive compensation) to securities dealers, financial institutions and other organizations, which may include Distributors-affiliated companies, that render distribution and administrative services in connection with the distribution of the Fund's Investor Class Shares; (b) the printing and distribution of reports and prospectuses for the use of potential investors in the Fund; (c) the preparing and distributing of sales literature; (d) the providing of advertising and engaging in other promotional activities, including direct mail solicitation, and television, radio, newspaper and other media advertisements; and (e) the providing of such other services and activities as may from time to time be agreed upon by the Fund.
SECTION 4. The Fund, on behalf of a Portfolio, may also expend amounts
under this Plan to finance payments of service fees under arrangements for
personal continuing shareholder services, up to a maximum annual rate of 0.25%
of the average daily net assets of the Investor Class Shares of such Portfolio.
Personal continuing shareholder services may include, but shall not be limited
to, the following: (i) distributing sales literature to customers; (ii)
answering routine customer inquiries concerning the Fund and the Shares; (iii)
assisting customers in changing dividend options, account designations and
addresses, and in enrolling in any of several retirement plans offered in
connection with the purchase of Shares; (iv) assisting customers in the
establishment and maintenance of customer accounts and records, and in the
placement of purchase and redemption transactions; (v) assisting customers in
investing dividends and capital gains distributions automatically in Shares; and
(vi) providing such other information and services as the Fund or the customer
may reasonably request.
Distributors may implement these arrangements either directly or through third parties.
SECTION 5. All amounts expended pursuant to this Plan shall be paid to Distributors pursuant to the related agreement to this Plan attached hereto as Exhibit A and are the legal obligation of the Fund and not of Distributors. The maximum service fee payable by the Fund on behalf of a Portfolio for personal continuing shareholder services shall be twenty-five one-hundredths of one percent (0.25%), or such lower rate for the Portfolio as is specified on Schedule A, per annum of the average daily net assets of the Portfolio attributable to the Shares owned by the customers of entity providing such shareholder services.
No provision of this Plan shall be interpreted to prohibit any payments by the Fund with respect to the Shares of a Portfolio during periods when the Fund has suspended or otherwise limited sales of such Shares.
SECTION 6. Distributors shall provide to the Fund's Board of Trustees ("Board of Trustees") and the Board of Trustees shall review, at least quarterly, a written report of the amounts expended under this Plan and the purposes for which such expenditures were made.
SECTION 7. This Plan and any agreement related to this Plan shall become effective immediately, with respect to any Portfolio, upon the receipt by the applicable Fund of both (a) the affirmative vote of a majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a majority of those trustees ("Trustees") of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreements related to it (the "Dis-interested Trustees"), cast in person at a meeting called for the purpose of voting on this Plan or such agreement.
SECTION 8. Any material amendments to this Plan must be approved, with respect to any Portfolio, by both (a) the affirmative vote of a majority of the Board of Trustees of the applicable Fund, and (b) the affirmative vote of a majority of the Dis-interested Trustees, cast in person at a meeting called for the purpose of voting on the amendment. In addition, this Plan may not be amended with respect to the Shares of any Portfolio to increase materially the amount to be spent for distribution provided for in Section 2 hereof unless such amendment is approved by a "majority of the outstanding voting securities" (as defined in the 1940 Act) of the Shares of such Portfolio.
SECTION 9. Unless sooner terminated pursuant to Section 10, this Plan and any related agreement shall continue in effect for the Shares of each Portfolio until June 30, 2005 and thereafter each shall continue in effect so long as such continuance is specifically approved, at least annually, in the manner provided for approval of this Plan in Section 7.
SECTION 10. This Plan may be terminated with respect to the Shares of any Portfolio at any time by vote of a majority of the Dis-interested Trustees of the applicable Fund, or by vote of a majority of the outstanding Shares of such Portfolio. If this Plan is terminated with respect to a Portfolio, the obligation of the Fund to make payments pursuant to this Plan with respect to such Portfolio will also cease and the Fund will not be required to make any payments with respect to such Portfolio beyond the termination date.
SECTION 11. Any agreement related to this Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time, with respect to the Shares of any Portfolio, without payment of any penalty, by vote of a majority of the Dis-interested Trustees of the applicable Fund or by a vote of the outstanding Shares of such Portfolio, on not more than sixty (60) days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its assignment.
SCHEDULE A
TO
THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Core Equity Fund
INVESCO Total Return Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Large Cap Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Technology Fund
PORTFOLIO - INVESTOR CLASS SHARES
INVESCO Dynamics Fund
INVESCO Small Company Growth Fund
AMENDMENT NO. 1
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), effective July 1, 2004, pursuant to Rule 12b-1, is hereby amended, effective October 15, 2004, as follows:
WHEREAS, the parties desire to amend the Plan to rename each INVESCO Fund by replacing "INVESCO" with "AIM" and further to change the name of INVESCO Core Equity Fund to AIM Core Stock Fund and INVESCO Mid-Cap Equity Fund to AIM Mid Cap Stock Fund;
NOW THEREFORE, 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
(INVESTOR CLASS SHARES)
AIM COMBINATION STOCK & BOND FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Core Stock Fund
AIM Total Return Fund
AIM EQUITY FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Large Cap Growth Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM SECTOR FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Technology Fund
AIM STOCK FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: October 15, 2004
AMENDMENT NO. 2
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), effective July 1, 2004, pursuant to Rule 12b-1, is hereby amended, effective April 29, 2005, as follows:
WHEREAS, on February 25, 2005, the Boards of Trustees of AIM Funds Group and AIM Equity Funds approved the addition of AIM Basic Balanced Fund and AIM Diversified Dividend Fund, respectively, to the Plan;
NOW THEREFORE, 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
(INVESTOR CLASS SHARES)
PORTFOLIO - INVESTOR CLASS SHARES
AIM Core Stock Fund
AIM Total Return Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Diversified Dividend Fund
AIM Large Cap Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Basic Balanced Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Technology Fund
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: April 29, 2005
AMENDMENT NO. 3
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), effective July 1, 2004, pursuant to Rule 12b-1, is hereby amended, effective July 18, 2005, as follows:
WHEREAS, the parties desire to amend the Plan to reflect the merger of AIM Core Stock Fund and AIM Total Return Fund;
NOW THEREFORE, 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
(INVESTOR CLASS SHARES)
AIM EQUITY FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Diversified Dividend Fund
AIM Large Cap Growth Fund
AIM FUNDS GROUP
PORTFOLIO - INVESTOR CLASS SHARES
AIM Basic Balanced Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM European Growth Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM SECTOR FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Technology Fund
AIM STOCK FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: July 18, 2005
AMENDMENT NO. 4
TO THE AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(INVESTOR CLASS SHARES)
The Amended and Restated Master Distribution Plan (the "Plan"), effective July 1, 2004, pursuant to Rule 12b-1, is hereby amended, effective March , 2006, as follows:
WHEREAS, on October __, 2005, the Board of Trustees of AIM Growth Series approved the addition of AIM Small Cap Growth Fund to the Plan;
NOW THEREFORE, 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
(INVESTOR CLASS SHARES)
AIM EQUITY FUNDS
PORTFOLIO -- INVESTOR CLASS SHARES
AIM Diversified Dividend Fund
AIM Large Cap Growth Fund
AIM FUNDS GROUP
PORTFOLIO -- INVESTOR CLASS SHARES
AIM Basic Balanced Fund
AIM GROWTH SERIES
PORTFOLIO- INVESTOR CLASS SHARES
AIM Small Cap Growth Fund
AIM INTERNATIONAL MUTUAL FUNDS
PORTFOLIO -- INVESTOR CLASS SHARES
AIM European Growth Fund
AIM INVESTMENT SECURITIES FUNDS
PORTFOLIO -- INVESTOR CLASS SHARES
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM SECTOR FUNDS
PORTFOLIO -- INVESTOR CLASS SHARES
AIM Technology Fund
AIM STOCK FUNDS
PORTFOLIO - INVESTOR CLASS SHARES
AIM Dynamics Fund
AIM Small Company Growth Fund"
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: March __, 2006
[AIM INVESTMENTS LOGO] MASTER RELATED AGREEMENT TO
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
(REIMBURSEMENT)
(INVESTOR CLASS SHARES)
This Master Related Agreement (the "Agreement") is entered into in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act") by each registered investment company, listed in Schedule A to this Agreement (each individually referred to as a "Fund", or collectively, "Funds"), severally, on behalf of each of the series of common stock or beneficial interest, as the case may be, set forth in Schedule A to this Agreement (each, a "Portfolio"), with respect to the Investor Class Shares of each such Portfolio listed on Schedule A. This Agreement, being made between A I M Distributors, Inc. ("Distributors") and each Fund, on behalf of each applicable Portfolio, defines the services to be provided by Distributors, or its designees, for which it is to receive its allocated share of expenses incurred pursuant to the Amended and Restated Master Distribution Plan (Investor Class Shares) (the "Plan") adopted by each of the Funds. The Plan has been approved by a majority of the directors/trustees ("Trustees") of each of the Funds, including a majority of the Trustees who have no direct or indirect financial interest in the operation of the Plan or this Agreement (the "Dis-Interested Trustees"), by votes cast in person at a meeting called for the purpose of voting on the Plan.
1. a. Distributors may use payments received pursuant to Paragraph 2 of this Agreement to provide continuing personal shareholder services to customers who may, from time to time, directly or beneficially own shares of the Funds. Continuing personal shareholder services may include but are not limited to, distributing sales literature to customers, answering routine customer inquiries regarding the Funds, assisting customers in changing dividend options, account designations and addresses, and in enrolling in any of several special investment plans offered in connection with the purchase of the Funds' shares, assisting customers in the establishment and maintenance of customer accounts and records and in the placement of purchase and redemption transactions, assisting customers in investing dividends and capital gains distributions automatically in shares, and providing such other services as the Funds or the customer may reasonably request and Distributors agrees to provide. Distributors will not be obligated to provide services which are provided by a transfer agent for a Fund with respect to a Portfolio.
b. Distributors may also use the payments received pursuant to Paragraph 2 of this Agreement for distribution-related services. As used in this Agreement, "distribution-related services" shall mean any activity which is primarily intended to result in the sale of the Shares, including, but not limited to, organizing and conducting sales seminars, implementing advertising programs, engaging finders and paying finders fees, printing prospectuses and statements of additional information (and supplements thereto) and annual and semi-annual reports for other than existing shareholders, preparing and distributing advertising material and sales literature, making supplemental payments to dealers and other institutions as asset-based sales charges, and administering the Plan.
c. Distributors may provide the services described in paragraphs a. and
b. above either directly or through third parties (its "designees").
2. For the services provided by Distributors or its designees pursuant to this Agreement, each Fund, on behalf of a Portfolio, shall expend, on a monthly basis, and shall reimburse Distributors to such extent, for Distributors' actual direct expenditures incurred over a rolling twelve-month period (or the rolling twenty-four month period specified below) in engaging in the activities and providing the services specified in Sections 3 and 4 of the Plan, an amount computed at an annual rate of 0.25% of the average daily net assets of such Portfolio during the month as applied to the average net asset value of the shares of such Portfolio purchased or acquired through exchange on or after the Plan Calculation Date shown for such Portfolio on Schedule A. Distributors shall not be entitled hereunder to reimbursement for overhead expenses (overhead expenses defined as customary overhead not including the costs of Distributors' personnel whose primary responsibilities involve marketing of the Funds). Payments by a Fund on behalf of a Portfolio hereunder, for any month, may be made only with respect to: (a) expenditures incurred by Distributors during the rolling twelve-month period in which that month falls, or (b) to the extent permitted by applicable law, for any month during the first twenty-four months following a Portfolio's commencement of operations, expenditures incurred by Distributors during the rolling twenty-four month period in which that month falls, and any expenditures incurred in excess of the limitations described above are not reimbursable. No Fund on behalf of a Portfolio shall be authorized to expend, for any month, a greater amount out of its assets to reimburse Distributors for expenditures incurred during the rolling twenty-four month period referred to above than it would otherwise be authorized to expend out of its assets to reimburse Distributors for expenditures incurred during the rolling twelve-month period referred to above.
3. The total of the fees calculated for all of the Funds listed on Schedule A for any period with respect to which calculations are made shall be paid to Distributors within 10 days after the close of each month.
4. Distributors shall furnish the Funds with such information as shall reasonably be requested by the Trustees of the Funds with respect to the fees paid to Distributors pursuant to this Agreement.
5. Distributors shall furnish the Trustees of the Funds, for their review on a quarterly basis, a written report of the amounts expended under the Plan and the purposes for which such expenditures were made.
6. Distributors may enter into other similar Master Related Agreements with any other investment company without a Fund's consent.
7. This Agreement shall become effective immediately upon its approval by a majority of the Trustees of each of the Funds, including a majority of the Dis-Interested Trustees, by votes cast in person at a meeting called for the purpose of voting on the Plan and this Agreement.
8. This Agreement shall continue in full force and effect as long as the continuance of the Plan and this Agreement are approved at least annually by a vote of the Trustees,
including a majority of the Dis-Interested Trustees, cast in person at a meeting called for the purpose of voting thereon.
9. This Agreement may be terminated with respect to any Fund at any time without payment of any penalty by the vote of a majority of the Trustees of such Fund who are Dis-interested Trustees or by a vote of a majority of the Fund's outstanding shares, on sixty (60) days' written notice. It will be terminated by any act which terminates the Fund's Plan, and in any event, it shall terminate automatically in the event of its assignment as that term is defined in the 1940 Act.
10. This Agreement may be amended by mutual written agreement of the parties.
11. All communications should be sent to the address of each signor as shown at the bottom of this Agreement.
12. This Agreement shall be construed in accordance with the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: President
EFFECTIVE [DATE]. FUND (LISTED IN SCHEDULE A)
on behalf of the Investor Class Shares of each
Portfolio listed on Schedule A
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
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SCHEDULE "A" TO
RELATED AGREEMENT
Fund Plan Calculation Date
------------------------------------------------------------------------------------------------------------------------------------
AIM COMBINATION STOCK & BOND FUNDS
INVESCO Core Equity Fund Investor Shares June 1, 2000
INVESCO Total Return Fund Investor Shares June 1, 2000
AIM EQUITY FUNDS
AIM Large Cap Growth Fund Investor Shares November 3, 2003
AIM INTERNATIONAL MUTUAL FUNDS
AIM European Growth Fund Investor Shares November 24, 2003
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund Investor Shares November 3, 2003
AIM Income Fund Investor Shares November 3, 2003
AIM Intermediate Government Fund Investor Shares November 24, 2003
AIM Municipal Bond Fund Investor Shares November 24, 2003
AIM Real Estate Fund Investor Shares November 3, 2003
AIM SECTOR FUNDS
INVESCO Technology Fund Investor Shares November 24, 2003
AIM STOCK FUNDS
INVESCO Dynamics Fund Investor Shares June 1, 2000
INVESCO Small Company Growth Fund Investor Shares June 1, 2000
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